A Company Purchased a Patent on January 1, 2014, for ¥2,500,000

question 151

Essay

A company purchased a patent on January 1, 2014, for ¥2,500,000. The patent's legal life is 20 years but the company estimates that the patent's useful life will only be 5 years from the date of acquisition. On June 30, 2014, the company paid legal costs of ¥135,000 in successfully defending the patent in an infringement suit. Prepare the journal entry to amortize the patent at year end on December 31, 2014.
(b) Clark Company purchased a franchise from Tastee Food Company for $400,000 on January 1, 2014. The franchise is for an indefinite time period and gives Clark Company the exclusive rights to sell Tastee Wings in a particular territory. Prepare the journal entry to record the acquisition of the franchise and any necessary adjusting entry at year end on December 31, 2014.
(c) Hulse Company incurred research costs of $500,000 in 2014 in developing a new product. Prepare the necessary journal entries during 2014 to record these events and any adjustments at year end on December 31, 2014.

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Definitions:

Taxable Income

The amount of income used to calculate how much the government can tax an individual or a corporation.

Marginal Tax Rate

The rate at which the last dollar of income is taxed, indicating the impact of additional income on tax liability.

State Finance

Refers to the management of a government's revenue, expenditures, and debt load through various practices, including budgeting, taxation, and fiscal policy.

Sales And Excise Taxes

Taxes imposed on the sale of specific goods and services, with excise taxes being levied on particular items such as alcohol and tobacco.