Question

The Horstmeyer Corporation commenced operations early in 2021. A number of expenditures were made during 2021 that were debited to one account called intangible asset. A recap of the $176,500 balance in this account at the end of 2021 is as follows:

Date Transaction Amount
February 3 State incorporation fees and legal costs related to organizing the corporation $ 9,500
March 1 Fire insurance premium for three-year period 8,500
March 15 Purchased a copyright 25,000
April 30 Research and development costs 45,000
June 15 Legal fees for filing a patent on a new product resulting from an R&D project 5,500
September 30 Legal fee for successful defense of patent developed above 17,000
October 13 Entered into a 10-year franchise agreement with franchisor 45,000
Various Advertising costs 21,000
Total $ 176,500
Required:
Prepare the necessary journal entry to clear the intangible asset account and to set up accounts for separate intangible assets, other types of assets, and expenses indicated by the transactions. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Answer 1

Dr Organization cost expense $ 9,500

Dr Fire insurance $8,500

Dr Copyright $25,000

Dr Research and Development Expense $45,000

Dr Patent $22,500

Dr Franchise $45,000

Dr Advertising $21,000

Cr Intangible Asset $176,500

Step-by-step explanation:

Preparation of the necessary journal entry to clear the intangible asset account and to set up accounts for separate intangible assets

Dr Organization cost expense $ 9,500

Dr Fire insurance $8,500

Dr Copyright $25,000

Dr Research and Development Expense $45,000

Dr Patent $22,500

($17,000 + $5500)

Dr Franchise $45,000

Dr Advertising $21,000

Cr Intangible Asset $176,500

($9,500+$8,500+$25,000++$45,000+$22,500+$45,000+$21,000)

(To clear the intangible asset account and to set up accounts for separate intangible assets)