Cheyenne Corp., organized in 2020, has the following transactions related to intangible assets. 1/2/20 Purchased patent (6-year life) $516,000 4/1/20 Goodwill purchased (indefinite life) 360,000 7/1/20 10-year franchise; expiration date 7/1/2030 380,000 9/1/20 Research and development costs 166,000 Prepare the necessary entries to record these intangibles. All costs incurred were for cash. Make the adjusting entries as of December 31, 2020, recording any necessary amortization

Answer and Explanation:

The Journal entry is shown below:-

1. Patents Dr, $516,000

To Cash $516,000

(Being patent is recorded)

2. Goodwill Dr, $360,000

To Cash $360,000

(Being goodwill is recorded)

3. Franchise Dr, $380,000

To Cash $380,000

(Being franchise is recorded)

4. Research and development expense Dr, $166,000

To Cash $166,000

(Being Research and development expense is recorded)

5. Amortization expense Dr, $105,000

To Patents $86,000

($516,000 : 6)

To Franchise $19,000

($380,000 : 10) * 1 : 2

(Being amortization expenses is recorded)