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Accounting For Franchise,Patents, and Trade Name?

Patents & Trademarks Discussion Forum

Accounting For Franchise,Patents, and Trade Name?

Postby tai38 » Thu Apr 05, 2012 5:46 am

1. On January 1, 2012, Sandro signed an agreement to operate as a franchisee of Hsian Copy Service Inc. for an initial franchise fee of $75,000. Of this amount, $15,000 was paid when the agreement was signed, and the balance is payable in 4 annual payments of $15,000 each, beginning January 1, 2013. The agreement provides that the down payment is not refundable and no future services are required of the franchisor. The present value at January 1, 2012, of the 4 annual payments discounted at 14% (the implicit rate for a loan of this type) is $43,700. The agreement also provides that 5% of the revenue from the franchise must be paid to the franchisor annually. Sandro's revenue from the franchise for 2012 was $900,000. Sandro estimates the useful life of the franchise to be 10 years.
2. Sandro incurred $65,000 of experimental and development costs in its laboratory to develop a patent that was granted on January 2, 2012. Legal fees and other costs associated with the registration of the patent totaled $17,600. Sandro estimates that the useful life of the patent will be 8 years.
3. A trademark was purchased from Shanghai Company for $36,000 on July, 2009. Expenditures for successful litigation in defense of the trademark totaling $10,200 were paid on July 1, 2012. Sandro estimates that the useful life of the trademark will be 20 years from the date of acquisition.

Instructions:
A. Prepare a schedule showing the intangible assets section of Sandro's balance sheet at December 31, 2012.
B. Prepare a schedule showing all expenses resulting from the transactions that would appear on Sandro's income statement for the year ended December 31, 2012.


I am having a lot of trouble with this problem any help would be greatly appreciated.
tai38
 
Posts: 11
Joined: Thu Mar 31, 2011 6:37 pm

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