Reference no: EM133081531
Question - Reichenbach Co., organized in 2019, has set up a single account for all intangible assets. The following summary discloses the debit entries that have been recorded during 2020 and 2021.
Intangible Assets
7/1/20 8-year franchise; expiration date 6/30/25 48,000$
10/1/20 Advance payment on laboratory space (2-year lease) 24,000
12/31/20 Net loss for 2020 including state incorporation fee, $1,000, and related legal fees of organizing, $5,000 (all fees incurred in 2020) 16,000
1/2/21 Patent purchased (10-year life) 84,000
3/1/21 Cost of developing a secret formula (indefinite life) 75,000
4/1/21 Goodwill purchased (indefinite life) 278,400
6/1/21 Legal fee for successful defense of patent purchased above 12,650
9/1/21 Research and development costs 160,000
Required -
a. Explain the situation in the Accounting Information System account for Intangible Assets and implications.
b. Prepare the necessary entries to clear the Intangible Assets account and to set up separate accounts for distinct types of intangibles. Make the entries as of December 31, 2021Prepare any correcting entries necessary.
c. Recording any necessary amortization and reflecting all balances accurately as of that date. (Ignore income tax effects.)
d. Prepare the Intangible Assets section that should be appear on the December 31, Balance Sheet.
f. Prepare the disclosure in Significant Accounting Policies.
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