Question

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 $214,000 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 $ 9,000 March 1 Fire insurance premium for three-year period 8,000 March 15 Purchased a copyright 33,000 April 30 Research and development costs 53,000 June 15 Legal fees for filing a patent on a new product resulting from an R&D project 4,000 September 30 Legal fee for successful defense of patent developed above 25,000 October 13 Entered into a 10-year franchise agreement with franchisor 53,000 Various Advertising costs 29,000 Total
Prepare the necessary journal entry to clear the intangible asset account and to set up accounts for separate intangible assets, other types of assets, and expenses indicated by the transactions. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.

Answer 1

Answer:

The Journal entry is as follows:

Organization cost expense A/c                   Dr. $9,000

Prepaid Insurance A/c                                  Dr. $8,000

Copyright A/c                                                Dr. $33,000

Research and development expense A/c   Dr. $53,000

Patent A/c    [4,000 + $25,000]                    Dr. $29,000

Franchise A/c                                                 Dr. $53,000

Advertising expense A/c                               Dr. $29,000

To Intangible Asset                                                              $214,000

(To record intangible asset account and to set up accounts for separate intangible assets, other types of assets, and expenses)