Nelson Company, Organized in 2014, Has These Transactions Related to Intangible

question 95

Essay

Nelson Company, organized in 2014, has these transactions related to intangible assets in that year:
Jan. 2 Purchased a patent (5-year life) $325,000.
Apr. 1 Goodwill purchased (indefinite life) $360,000.
July 1 Acquired a 9-year franchise; expiration date July 1, 2023, $720,000.
Sept. 1 Research and development costs $185,000.
Instructions
(a) Prepare the necessary entries to record these intangibles. All costs incurred were for cash.
(b) Make the entries as of December 31, 2014, recording any necessary amortization.
(c) Indicate what the balance should be on December 31, 2014.

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Definitions:

Time-Driven Activity-Based Costing

A refinement of activity-based costing that assigns costs based on the actual duration activities take, using predetermined time estimates.

Customer Service Department

A division of a business that handles queries, supports customers with problems or complaints, and provides information about products or services.

Customer Cost Analysis

A process of determining the total cost incurred by a business to serve a customer, including all direct and indirect expenses.

Time-Driven Activity-Based Costing

An approach to activity-based costing that assigns resource costs directly to products or services based on the estimated time required for each activity.