NAMA : MUH.

SYUKUR

NIM : A031191077

MATA KULIAH : AKUNTANSI KEUANGAN

TUGAS : EXERCISE   E.12.9

E12.9 (LO2, 5) (Accounting for Patents, Franchises, and R&D) Devon Harris
Company has provided information on intangible assets as follows.A patent
was purchased from Bradtke Company for $2,500,000 on January 1, 2018.Harris
estimated the remaining useful life of the patent to be 10 years. The patent was
carried in Bradtke's accounting records at a net book value of $2,000,000 when

Bradtke sold it to Harris.During 2019, a franchise was purchased from Greene

Company for $580,000. Inaddition, 5% of revenue from the franchise must be paid to
Greene. Revenue from thefranchise for 2019 was $2,500,000. Harris estimates the
useful life of the franchise tobe 10 years and takes a full year's amortization in the
year of purchase.

Harris incurred research and development costs in 2019 as follows.

Materials and equipment $142,000

Personnel 189,000
Indirect costs 102,000
$433,000
Harris estimates that these costs will be recouped by December 31, 2022, but due
touncertainty in the market, its process has not achieved economic viability.
Thematerials and equipment purchased have no alternative uses.On January 1,
2019, because of recent events in the field, Harris estimates that theremaining life of
the patent purchased on January 1, 2018, is only 5 years from January 1, 2019.

Instructions

a. Prepare a schedule showing the intangibles section of Harris's statement of

financial position at December 31, 2019. Show supporting computations in good
form.

b. Prepare a schedule showing the income statement effect for the year ended
December 31, 2019, as a result of the facts above. Show supporting computations in
good form.

Answer
a.

DEVON HARRIS COMPANY

INTANGIBLES SECTION OF BALANCE SHEET
December 31, 2019
Patent from Bradtke Company, net of accumulated amortization
$1,800,000
(Schedule 1)
Franchise from Greene Company, net of accumulated
522,000
amortization (Schedule 2)
$2,322,000Total intangibles

Catatan :

Schedule 1 Computation of Patent from Bradtke Company.

Cost of patent at date of purchase $2,500,000

Amortization of patent for 2018 ($2,500,000 ÷ 10
(250,000)
years)
2,250,000
Amortization of patent for 2019 ($2,250,000 ÷ 5
(450,000)
years)
Patent balance $1,800,000

Shedule 2 Computation of Franchise from Greene Company

Cost of franchise at date of purchase 580,000

Amortization of franchise for 2019 ($580,000 ÷ 10)  (58,000)

Franchise balance $522,000

b. DEVON HARRIS COMPANY

 Income Statement Effect
For the year ended December 31, 2019

    :Patent from Bradtke Company

Amortization of patent for 2019($2,500,000 - $250,000) ÷     
$450,000  
)5
   :Franchise from Greene Company

  $125,000Payment to Greene Company ($2,500,000 × 5%)     

183,000 58,000Amortization of franchise for 2019 ($580,000 ÷ 10)     

433,000  Research and development costs

$1,066,000  Total charged against income