Question

P10-4 The Horstmeyer Corporation commenced operations early in 2021. A number of expenditures were made during 2021 that were debited to one account called intangible asset. A recap of the $144,000 balance in this account at the end of 2021 is as follows: Date Transaction Amount February 3 State incorporation fees and legal costs related to organizing the corporation $ 7,000 March 1 Fire insurance premium for three-year period 6,000 March 15 Purchased a copyright 20,000 April 30 Research and development costs 40,000 June 15 Legal fees for filing a patent on a new product resulting from an R&D project 3,000 September 30 Legal fee for successful defense of patent developed above 12,000 October 13 Entered into a 10-year franchise agreement with franchisor 40,000 Various Advertising costs 16,000 Total $144,000 Required: Prepare the necessary journal entry to clear the intangible asset account and to set up account

Answer 1

Answer:

The Journal entry is as follows:

Organization cost expense A/c                  Dr. $7,000

Prepaid Insurance A/c                                 Dr. $6,000

Copyright A/c                                               Dr. $20,000

Research and development expense A/c  Dr. $40,000

Patent A/c                                                     Dr. $15,000

Franchise A/c                                                Dr. $40,000

Advertising expense A/c                              Dr. $16,000

To Intangible asset                                                             $144,000

(To clear the intangible asset account)