Solution:
Question #1:
Record amortisation expense for the intangible assets at December 31, 2018.
UTS acquired a franchise on July 1, 2012, by paying an initial franchise fee of $333,000. The contractual life of the franchise is 9 years.
Dr Amortization expense - franchise 18,500 ($333,000/9 years x 6/12)
Cr Franchise 18,500
Question #2: Prepare the intangible asset section of the December 31, 2018, balance sheet.
The balance sheet contains 3 blanks: Goodwill, patents, Franchises.
Goodwill
Excess of consideration over net identifiable assets of Heinrich: $3,510,000- $3,200,000= $310,000.
Goodwill from a business combination is not amortized but tested annually for impairment.
Patents
Patents are amortized over the shorter of the legal and useful lives.
Amortization expense = $82,250/7 years = $11,750
Book value = 82,250 - 11,750
= 70,500
Franchises
Book value = $333,000- 18,500 = $314,500
intangible asset section of the December 31, 2018, balance sheet
Goodwill $310,000
Patents 70,500
Franchises 314,500
Total $695,000
