Early in 2014, Nathan Company Entered into the Following Cash

question 17

Essay

Early in 2014, Nathan Company entered into the following cash transactions:
a.Registered a patent. Research and development costs for the patent was $75,000. Legal fees incurred in registration were $7,500.
b.Purchased a franchise with an unlimited life with payment of a $35,000 initial franchise fee and a $5,000 operating fee.
c.Purchased laboratory equipment costing $175,000. The equipment, with an estimated life of ten years and no residual value, will be used in a variety of research projects.
d.Purchased a patent from Asteroid Company at a cost of $40,000. The patent is believed to have an estimated useful life of ten years.
e.Registered a trademark that was developed by Nathan's advertising department at a cost of $11,000. Registration fees were $500, and the legal fees incurred were $1,500. The trademark is expected to last indefinitely. Required:
Prepare journal entries to record each transaction, including appropriate amortization for the year. Unless a better alternative is indicated, amortize the intangibles over their legal lives.

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Definitions:

Markup

The amount added to the cost price of goods to cover overhead and profit, expressed as a percentage of the cost.

Return On Investment

A financial metric used to evaluate the efficiency or profitability of an investment, calculated by dividing the gain from the investment by its cost.

Absorption Costing

An approach to product costing that compounds all expenses involved in manufacturing, such as direct materials, labor costs, and all types of overheads, into the product’s final cost.

Markup

The discrepancy between the selling price and the production cost of a product or service, shown as a percentage of the production cost.