Question

Carla Vista Company, organized in 2019, has set up a single account for all intangible assets. The following summary discloses the debit entries that have been recorded during 2020.
1/2/20 Purchased patent (7-year life) $314,300
4/1/20 Purchase goodwill (indefinite life) 359,000
7/1/20 Purchased franchise with 10-year life; expiration date 7/1/30 439,000
8/1/20 Payment of copyright (5-year life) 166,800
9/1/20 Research and development costs 229,000
TOTAL :$1,508,100

Prepare the necessary entry to clear the Intagible assets account and to set up separate accounts for distinct types of intangibles.

Answer 1

Answer:

Patent (Dr.)         $314,300

Goodwill (Dr.)     $359,000

Franchise (Dr.)   $439,000

Copyright (Dr.)   $166,800

Research and development (Dr.)    $229,000

Intangible Assets (Cr.)    $1,508,100

Explanation:

Intangible assets are not physical in nature. The value of intangible assets is hard to evaluate. Carla Vista Company, will record intangible assets at the value at which it is purchased. All individual intangible assets are debited and the main single account of intangible assets is credited to record and set up separate accounts for distinct type of intangibles.