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Fundamental Accounting Principles

E1-23 Hootie and the Blow Fish, Inc., organized in 2002, has the following transactions related
to intangible assets.
1/2/02 Purchased patent (7-year life) $490,000
4/1/02 Goodwill purchased (indefinite life) 360,000
7/1/02 10-year franchise; expiration date 7/1/2012 420,000
9/1/02 Research and development costs 185,000

Instructions Using Microsoft Excel
Prepare the necessary entries to record these intangibles. All costs incurred were for cash. Make
the entries as of December 31, 2002, recording any necessary amortization and reflecting all
balances accurately as of that date.

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Solution Preview

Hi there,
<br>Here are your entries:
<br>Note: I am assuming that all items are amortized on a straight line basis.
<br>DR: Patent purchase 490,000
<br>CR: Cash 490,000
<br>490,000 / 7 years = 70,000 per year
<br>DR: Amortization expense 70,000
<br>CR: Accumulated Amortization 70,000
<br>DR: Goodwill purchase ...

Solution Summary

This question involves the fundamentals of accounting