Oriole Company, organized in 2019, has set up a single account for all intangible assets. The following summary discloses the debit entries that have been recorded during 2020. 1/2/20 Purchased patent (7-year life) $311,500
4/1/20 Purchase goodwill (indefinite life) 355,000
7/1/20 Purchased franchise with 10-year life; expiration date 7/1/30 435,000
8/1/20 Payment of copyright (5-year life) 162,000
9/1/20 Research and development costs 225,000
$1,488,500
Required:
1. Prepare the necessary entry to clear the Intangible Assets account and to set up separate accounts for distinct types of intangibles.
2. Make the entry as of December 31, 2020, recording any necessary amortization.
3. Reflect all balances accurately as of December 31, 2020.

Oriole Company

a. Journal Entries:

1. December 31, 2020:

Accounts Titles        Debit          Credit

Patent                 $311,500

Goodwill             355,000

Franchise           435,000

Copyright           162,000

R & D expense 225,000

Intangibles                              $1,488,500

To transfer out to individual intangible accounts.

2. Amortization Expense:

Accounts Titles        Debit          Credit

Debit Amortization Expenses:

Patent                   $44,500

Franchise              $21,750

Copyright              $13,500

Accumulated amortization       $79,950

To record amortization expense for the year.

3. December 31, 2020 balances:

December 31, 2020 Balances:

                       Book Value     Amortization Expense  Net Book Balance

Patent                 $311,500       $44,500                           $267,000

Goodwill             355,000       $0                                     $355,000

Franchise           435,000       $21,750                             $413,250

Copyright           162,000        $13,500                            $148,500

R & D expense 225,000        $225,000                         $0

Explanation:

a) Data and Calculations:

1/2/20 Purchased patent (7-year life) $311,500

4/1/20 Purchase goodwill (indefinite life) 355,000

7/1/20 Purchased franchise with 10-year life; expiration date 7/1/30 435,000

8/1/20 Payment of copyright (5-year life) 162,000

9/1/20 Research and development costs 225,000

$1,488,500

Amortization Expenses:

Patent = $44,500 ($311,500/7)

Goodwill = $0

Franchise = $21,750 ($435,000/10 * 6/12)

Copyright = $13,500 ($162,000/5 * 5/12)

Total  =     $79,950

December 31, 2020 Balances:

                       Book Value     Amortization Expense  Net Book Balance

Patent                 $311,500       $44,500                           $267,000

Goodwill             355,000       $0                                     $355,000

Franchise           435,000       $21,750                             $413,250

Copyright           162,000        $13,500                            $148,500

R & D expense 225,000        $225,000                         $0