Question

Crane Company, 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.

1/2/20 Purchased patent (9-year life) $387,900
4/1/20 Purchase goodwill (indefinite life) 341,000
7/1/20 Purchased franchise with 10-year life; expiration date 7/1/30 421,000
8/1/20 Payment of copyright (5-year life) 145,200
9/1/20 Research and development costs 211,000
$1,506,100

Required:
Prepare the necessary entry to clear the Intangible Assets account and to set up separate accounts for distinct types of intangibles.

Answer 1

Date Account title Debit Credit

12/31/2020 Patent $387,900

Goodwill $341,000

Franchise $421,000

Copyright $145,200

Research and Devel. Expense $211,000

Intangible Assets $1,506,100

The individual intangible asset accounts will be debited as shown above. Research and Development costs are not to be capitalized however according to U.S. GAAP and so will go to expenses.