PROBLEM 12-1
Franchises
Prepaid Rent
Organization Expense ($1,000 + $5,000)
Retained Earnings ($16,000 – $6,000)
Patents ($74,000 + $12,650)
Research and Development Expense
($75,000 + $160,000)
Goodwill
Intangible Assets
Franchise Amortization Expense ($42,000  8)
Retained Earnings ($42,000  8 X 6/12)
Franchises
Rent Expense ($28,000  2)
Retained Earnings ($28,000  2 X 3/12)
Prepaid Rent
42,000
28,000
6,000
10,000
86,650
235,000
278,400
686,050
5,250
2,625
7,875
14,000
3,500
17,500
Patent Amortization Expense
Patents
($74,000  10) + ($12,650 X 7/115)
8,170
Goodwill Amortization Expense
Goodwill ($278,400  40 X 9/12)
5,220
8,170
5,220
PROBLEM 12-7
Yuka Sato Corporation
Year Ended December 31, 2001
Adjusting Journal Entries
(Not required)
-1Machinery
34,700
Patents
(To transfer cost of improving machinery to the plant asset account)
-2Cost of Goods Sold
Accumulated Amortization of Patents
[To record 2001 patent amortization (1/20 X $93,500)]
34,700
4,675
4,675
-3Licensing Agreement No. 2
4,000
Unearned Revenue
(To classify revenue received in advance on licensing agreement
as unearned revenue)
-4Prior Period Adjustment—Licensing
Agreement No. 1
42,450
Licensing Agreement No. 1
(To write off the permanent 70 percent reduction in the expected
revenue-producing value of licensing agreement No. 1 caused by
the late December 2000 explosion and the amortization of
licensing agreement No. 1 for 2000)
Schedule 1
Licensing agreement No. 1 amortization
Book value of licensing agreement No. 1
destroyed prior to adjustment
4,000
42,450
$60,000  40 =
$ 1,500
$58,500 X 70% =
40,950
$42,450
PROBLEM 12-7 (Continued)
-5Cost of Goods Sold
6,450
Accumulated Amortization of Licensing
Agreements ($450 + $6,000)
To record 2001 amortization of licensing agreements No. 1
([$60,000 – $42,450]  39) and No. 2 (10% X $60,000)
-6Retained Earnings
30,000
Goodwill
(To transfer cost of incorporation improperly charged to Goodwill)
-7Equipment
15,000
Accounts Receivable
6,100
Leasehold Improvements
(To charge the equipment account with movable equipment and
to record a receivable from the landlord for the real estate taxes
erroneously paid by Sato)
6,450
30,000
21,100
-8Cost of Goods Sold
1,500
Prior Period Adjustment—Amortization of Leasehold
Improvements
1,500
Accumulated Amortization of Leasehold
Improvements
(To record 2000 and 2001 amortization of leasehold improvements based on 10 year life of lease (2 X 10% X $15,000)
NOTE: Spreadsheets could not be saved
3,000