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 years

Required:

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.

Question

Josie Stephenson

Business

26 July, 14:53

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 years

Required:

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.

+2

Answers (1)

Know the Answer?

Tiara Juarez · Answer 1

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