Acquisition of Intangible Assets
Transactions during 2008 of the newly organized Menlove Corporation included the following:
Jan. 2 Paid legal fees of $15,000 and stock certificate costs of $8,300 to complete organization of the corporation.
15 Hired a clown to stand in front of the corporate office for two weeks and hand out pamphlets and candy to create goodwill for the new enterprise. Clown cost, $1,000; pamphlets and candy, $500.
Apr. 1 Patented a newly developed process with costs as follows:
|
Legal fees to obtain patent |
$42,900 |
|
Patent application and licensing fees |
6,350 |
|
Total |
$49,250 |
It is estimated that in six years other companies will have developed improved processes, making the Menlove Corporation process obsolete.
May 1 Acquired both a license to use a special type of container and a distinctive trademark to be printed on the container in exchange for 600 shares of Menlove Corporation no par common stock selling for $50 per share. The license is worth twice as much as the trademark, both of which may be used for six years.
July 1 Constructed a shed for $131,000 to house prototypes of experimental models to be developed in future research projects.
Dec. 31 Incurred salaries for an engineer and chemist involved in product development totaling $175,000 in 2008.
Instructions:
1. Give journal entries to record the preceding transactions. (Ignore amortization of intangible assets.)
2. Present the Intangible Assets section of Menlove Corporation’s balance sheet at December 31, 2008.