Purchase Solution

Accounting for Franchise, Patents, and Trade Name: Haerhpin Corporation

Not what you're looking for?

Ask Custom Question

Information concerning Haerhpin Corporation's intangible assets is as follows.

1. On January 1, 2007, Haerhpin signed an agreement to operate as a franchisee of Hsian Copy Service, Inc. for an initial franchise fee of $75,000. Of this amount, $15,000 was paid when the agreement was signed, and the balance is payable in 4 annual payments of $15,000 each, beginning January 1, 2008. The agreement provides that the down payment is not refundable and no future services are required of the franchisor. The present value at January 1, 2007, of the 4 annual payments discounted at 14% (the implicit rate for a loan of this type) is $43,700. The agreement also provides that 5% of the revenue from the franchise must be paid to the franchiser annually. Haerhpin's revenue from the franchise for 2007 was $950,000. Haerhpin estimates the useful life of the franchise to be 10 years. (Hint: You may want to refer to Appendix 18A to determine the proper accounting treatment for the franchise fee and payments.)

2. Haerhpin incurred $65,000 of experimental and development costs in its laboratory to develop a patent that was granted on January 2, 2007. Legal fees and other costs associated with registration of the patent totaled $13,600. Haerhpin estimates that the useful life of the patent will be 8 years.

3. A trademark was purchased from Shanghai Company for $32,000 on July 1, 2004. Expenditures for successful litigation in defense of the trademark totaling $8,160 were paid on July 1, 2007. Haerhpin estimates that the useful life of the trademark will be 20 years from the date of acquisition.

Instructions:

(a) Prepare a schedule showing the intangible assets section of Haerhpin's balance sheet at December 31, 2007. Show supporting computations in good form.

(b) Prepare a schedule showing all expenses resulting from the transactions that would appear on Haerhpin's income statement for the year ended December 31, 2007. Show supporting computations in good form.

Purchase this Solution

Solution Summary

This solution contains a schedule detailing the intangible assets section of the company balance as well as a schedule detailing expenses from the transactions, including calculations. It is in Excel format.

Purchase this Solution


Free BrainMass Quizzes
Employee Orientation

Test your knowledge of employee orientation with this fun and informative quiz. This quiz is meant for beginner and advanced students as well as professionals already working in the HR field.

Motivation

This tests some key elements of major motivation theories.

Basic Social Media Concepts

The quiz will test your knowledge on basic social media concepts.

Six Sigma for Process Improvement

A high level understanding of Six Sigma and what it is all about. This just gives you a glimpse of Six Sigma which entails more in-depth knowledge of processes and techniques.

Learning Lean

This quiz will help you understand the basic concepts of Lean.