Reference no: EM131755591

Question: Barb Company has provided information on intangible assets as follows::

1. A patent was purchased from Lou Company for $1,500,000 on january 1, 2015. Barb estimated the remaining useful life of the patent to be 10 years. The patent was carreied in Lou's accounting records at a net book value of $1,250,000 when Lou sold it to Barb

2. During 2016, a franchise was purchased from Rink Company for $500,000. In addition, 5% of revenue from the franchise must be paid to Rink. Revenue from teh franchise for 2016 was $2,000,000. Barb estimates the useful life of the franchise to be 10 years and takes a full year's amortization in the year of purchase.

3. Barb incurred R&D costs in 2016 as follows:

Materials and Equipment       $120,000

Personnel                           $140,000

Indirect Cost                      $60,000

Total                                 $320,000

Barb estimates that these cost will be recouped by December 31, 2017

4. On January 1, 2016, barb estimates, based on new events that the remaining life of the patent purchased on January 1, 2015, is only 5 years from January 1, 2016.

Required: 1. Prepare the intangibles assets section of barbs balance sheet at December 31, 2016. Show supporting computations.

2. Prepare a schedule showing the income statement effects for teh year ended December 31, 2016, as a result of the previously mentioned facts. Show supporting computations.