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The following information relates to the intangible assets of University Testing Services (UTS):
a. On January 1, 2021, UTS completed the purchase of Heinrich Corporation for $2,745,000 in cash. The fair value of the net identifiable assets of Heinrich was $2,450,000.
b. Included in the assets purchased from Heinrich was a patent valued at $92,000. The original legal life of the patent was 20 years; there are 12 years remaining, but UTS believes the patent will be useful for only eight more years
c. UTS acquired a franchise on July 1, 2021, by paying an initial franchise fee of $340,000. The contractual life of the franchise is 10 years.
Prepare the intangible asset section of the December 31, 2021, balance sheet

Sagot :

Answer:

Testing Services (UTS)

Balance Sheet

December 31, 2021

(Intangible Asset Section)

Details                                                  $          

Intangible Assets

Goodwill                                        295,000

Patent                                              80,500

Franchise                                       323,000  

 Total Intangible Assets              698,500  

Explanation:

Goodwill = Goodwill on December 31, 2021 = Cash paid - Fair value of the net identifiable assets = $2,745,000 - $2,450,000 = $295,000

Patent annual amortization expense = Patent value / Number of years UTS believes the patent will be useful = $92,000 / 8 = $11,500

Patent = Patent on December 31, 2021 = Patent value - Patent annual amortization expense = $92,000 - $11,500 = $80,500

Franchise annual amortization expense = Initial franchise fee / Contractual life of the franchise = $340,000 / 10 = $34,000

Franchise half-yearly amortization expense (from July 1 to December 31, 2021) = Franchise annual amortization expense / 2 = $34,000 / 2 = $17,000

Franchise = Franchise on December 31, 2021 = Initial franchise fee - Franchise half-yearly amortization expense = $340,000 - $17,000 = $323,000

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