Homework answers / question archive / On January 1, 2020, Concord signed an agreement to operate as a franchisee of Hsian Copy Service, Inc

On January 1, 2020, Concord signed an agreement to operate as a franchisee of Hsian Copy Service, Inc

Accounting

Share With

On January 1, 2020, Concord signed an agreement to operate as a franchisee of Hsian Copy Service, Inc. for an initial franchise fee of $60,000. Of this amount, $12,000 was paid when the agreement was signed, and the balance is payable in 4 annual payments of $12,000 each, beginning January 1, 2021. 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, 2020, of the 4 annual payments discounted at 12% (the implicit rate for a loan of this type) is $36,450. The agreement also provides that 8% of the revenue from the franchise must be paid to the franchisor annually. Concord's revenue from the franchise for 2020 was $850,000. Concord estimates the useful life of the franchise to be 10 years. (Hint: You may want to refer to Chapter 18 to determine the proper accounting treatment for the franchise fee and payments.) Concord incurred $75,000 of experimental and development costs in its laboratory to develop a patent that was granted on January 2, 2020. Legal fees and other costs associated with registration of the patent totaled $20,000. Concord estimates that the useful life of the patent will be 8 years. A trademark was purchased from Shanghai Company for $35,000 on July 1, 2017. Expenditures for successful litigation in defense of the trademark totaling $10,200 were paid on July 1, 2020. Concord estimates that the useful life of the trademark will be 20 years from the date of acquisition. 2. 3.
Your answer is partially correct. Prepare a schedule showing the intangible assets section of Concord’s balance sheet at December 31, 2020. CONCORD CORPORATION Intangible Assets December 31, 2020 Patent $ 17500 Trademark 53382 Franchise 43605 Total Intangible Assets $ 114487 e Textbook and Media
Prepare a schedule showing all expenses resulting from the transactions that would appear on Concord's income statement for the year ended December 31, 2020. CONCORD CORPORATION Expenses Resulting from Selected Intangible Assets Transactions For the Year Ended December 31, 2020 Interest Expense $ 4374 Franchise Amortization V 4845 Franchise Fee V 68000 Patent Amortization 2500 Trademark Amortization 2492 Total Intangible Assets $ 82211 e Textbook and Media