Turn-In Problems
Problem 1: Intangible Example 1
Patent
Pizza the Action purchases a patent from On a Roll on January 1, 2018 for
$54,000. The patent has a remaining legal life of 16 years. Pizza the Action feels
the patent will be useful until the end of 2027. Prepare Pizza the Action’s journal
entries to record the purchase and 2018 amortization. In January 2020, Pizza the Action spends $24,000 successfully defending a patent
suit. Pizza the Action still feels the patent will be useful until the end of 2027.
Prepare the entries to record the $24,000 expenditure and the 2020 amortization. Assume instead that in January 2020, Pizza the Action spends $24,000 to defend its
patent but they are UNSUCCESSFUL and the patent is deemed useless. Prepare
the necessary entries. Be sure to include the dates these entries will be written. Turn-In Problems
Problem 2: Intangible Example 2
Franchise
The hair salon Mane Event obtained a franchise from Curl Up and Dye for a cash
payment of $120,000 on April 1, 2019. The franchise grants Mane Event the right
to sell certain products and services for a period of 8 years. Prepare Mane Event’s
April 1 journal entry and December 31 adjusting entry. Turn-In Problems
Problem 3: Natural Resources Example
Migs, Inc. purchases a diamond mine for $400,000, and incurs $300,000 in
capitalizable costs related to the property. Migs estimates that 1,000,000 diamonds
will be extracted from the mine over its useful life and the property will have no
residual value. In 2017, Migs extracts 195,000 diamonds and in 2018, Migs
extracts 283,000 diamonds.
Calculate the depletion per diamond using the units of production method.
Calculate the depletion of the mine for 2017.
Record the depletion for 2017. Calculate the depletion of the mine for 2018.
Record the depletion for 2018. Assume Migs, Inc. sells 310,000 diamonds for $50 each, all received in cash.
Record the entry.

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