14 October, 22:24

# The following information concerns the intangible assets of Epstein Corporation:a. On June 30, 2021, Epstein completed the acquisition of the Johnstone Corporation for \$1,580,000 in cash. The fair value of the net identifiable assets of Johnstone was \$1,350,000.b. Included in the assets purchased from Johnstone was a patent that was valued at \$60,200. The remaining legal life of the patent was 12 years, but Epstein believes that the patent will only be useful for another seven years.c. Epstein acquired a franchise on October 1, 2021, by paying an initial franchise fee of \$154,800. The contractual life of the franchise is 9 yearsRequired:1. Prepare year-end adjusting journal entries to record amortization expense on the intangibles at December 31, 2021.2. Prepare the intangible asset section of the December 31, 2021, balance sheet.

+3
1. 14 October, 23:40
0
1)

To record amortization of goodwill

Calculation of goodwill:

Consideration exchanged 1,580,000

Less: Fair value of net identifiable assets 1,350,000

Goodwill acquired 230,000

The cost of goodwill is not amortized.

For Patent Ammortization = 60,200/7 = 8600 / 2 = 4300

For Franchise Ammortization = 154,800/9 = 17200 / 12 = 1433.33 * 3 = 4300

Account Title Dr Cr

Amortization expense 4300

Patent 4300

Amortization expense 4300

Franchise 4300

2)

Patent = \$60,200 - 4,300 = \$55,900

Franchise = \$154,800 - 4,300 = \$150,500

Balance Sheet

December 31, 2021

Intangible assets:

Goodwill 230,000

Patent 55,900

Franchise 150,500

Total intangibles 436,400