The intangible assets section of Sappelt Company at December 31, 2015, is presented below.
The patent was acquired in January 2015 and has a useful life of 10 years. The franchise was acquired in January 2012 and also has a useful life of 10 years. The following cash transactions may have affected intangible assets during 2016.
Jan. 2: Paid $27,000 legal costs to successfully defend the patent against infringement by another company.
Jan.-June: Developed a new product, incurring $140,000 in research and development costs. A patent was granted for the product on July 1. Its useful life is equal to its legal life.
Sept. 1: Paid $50,000 to an extremely large defensive lineman to appear in commercials advertising the company's products. The commercials will air in September and October.
Oct. 1: Acquired a franchise for $140,000. The franchise has a useful life of 50 years.
Instructions
- Prepare journal entries to record the transactions above.
- Prepare journal entries to record the 2016 amortization expense.
- Prepare the intangible assets section of the balance sheet at December 31, 2016.