Montana Matt's Golf Inc was formed on July 1,2006, when Matt Magilke purchased the old master golf company. Master provides video golf instructions at kiosks in shopping malls. Magilke plans to integrate the instruction business into his golf equipment and accessory stores. Magilke paid $750,000 cash for old master. At the time old master's balance sheet reported assets of $650,000 and liabilities of $200,000 (thus owners' equity was $450,000) The fair value of old master's assets is estimated to be $800,000. Included in the assets is the old master trade name with a fair value of $10,000 and copy right on some instructional books with a fair value of $20,000. The trade name has a remaining life of 5 yrs and can be renewed at nominal cost indefinitely. The copyright has a remaining life of 40 yrs.
(A) Prepare the intangible assets section of Mountain Matt's golf Inc. at December 31, 2006. How much amortization expense is included in Montana Matt's income for the year ended December 31,2006? Show all supporting computations.
(B) Prepare the journal entry to record amortization expense for 2007. Prepare the intangible assets section of Montana Matt's Golf Inc at December 31, 2007. (No impairments are required to be recorded in 2007)
The solution explains how to prepare the intangible assets section in a balance sheet and how to record the journal entry for amortization expense.