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:

Amortized Cost Model

An accounting technique used to gradually write down the cost of an intangible asset over its useful life.

Fair Value

The price that would be received for selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Profit Or Loss Model

A financial model that calculates the difference between a company’s revenues and its expenses, helping understand its profitability over a certain period.