Journal entries for intangible assets: Penner Co
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The following transactions involve intangible assets of Penner Co occurring on or near Dec 31, 2004. Write journal entries needed at the date to record the transaction and at December 31, 2005 to record any resultant amortization. Write NA if no entry is required at a particular date.
1. Penner paid Grand Co $200,000 for exclusive to market a particular product, using theGrand name and logo in promotinal material. The franchise runs for as long as Penner is in business
2. Penner spent $300,000 developing a new manufacturing process. It has applied for a patent, and it believes that its application will be successful.
3. In January, 2005, Penner's application fora patent (#2 above) was granted. Legal and registration costs were $50,000. The patent runs for 20 years. the manufacturing process will be useful to Penner for 10 years.
4. Penner incurred $80,000 in successfully defencing one of its patents in an infringement suit. Patent expiring during December, 2008.
5. Penner incurred $200,000 in an unsuccessful patent defense. As a result of the adverse verdict, the patent, with a remaining unamortized cost of $105,000 is worthless.
6. Penner paid Sneed Lab. $52,000 for research and development work performed by Sneed under contract for Penner. Benefits are to las 6 years.
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The solution explains journal entries relating to intangible assets
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1. Penner paid Grand Co $200,000 for exclusive to market a particular product, using theGrand name and logo in promotinal material. The franchise runs for as long as Penner is in business
Dec 31, 2004 Perpetual Franchise Dr 200,000
Cash Cr 200,000
Dec 31, 2005 No amortization since it is a perpetual franchise
2. Penner spent $300,000 developing a new manufacturing process. It has applied for a patent, and it believes that its application will be successful.
1.This is research and development expense and should be expensed.
Dec 31, 2004 Research & Development Expense Dr 300,000
Cash Cr 300,000
Dec 31, 2005 No amortization as the cost is ...
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