[pennington4]

I need some advice on clearing the Intangible account and setting up separate accounts.

[morgaine300]

I'm not sure what you mean. Are you saying you have different intangibles lumped into one account and you want to get them into separate accounts?

Assuming that's what you mean, the easy answer is to credit the lump number and debit each of the separate accounts you want to make. If you've got them at net values, that is, less the accumulated amortization, it will stay that easy.

If you've got a contra accumulated amortization account, then you're going to have to do a little extra work separating all that info out, and then debit the accumulated account and credit each of the individual ones.

If this is not what you're meaning, please clarify.

[pennington4]

I'm not sure what you mean. Are you saying you have different intangibles lumped into one account and you want to get them into separate accounts?

Assuming that's what you mean, the easy answer is to credit the lump number and debit each of the separate accounts you want to make. If you've got them at net values, that is, less the accumulated amortization, it will stay that easy.

If you've got a contra accumulated amortization account, then you're going to have to do a little extra work separating all that info out, and then debit the accumulated account and credit each of the individual ones.

If this is not what you're meaning, please clarify.

It does have contra accumulated amortization accounts and I am having some trouble getting that part figured out.

Here is the actual question:

Prepare the necessary entries to clear the Intagible assets account and to set up separate accounts for distinct types of intangibles. Make entries as of 12-31-10 recording nec. Amortization and refelcting all blances accurately. (do not worry about tax effects)

7/1/09 8-year franchise, expiration date 6/30/17 $48,00
10/1/09 Advanced payment on laboratory space (2 year) 24,000
12/31/09 Net loss for 2009 including incorp fee, $1000. Amd re;ated ;ega; fees and related organizing fee $5000(all inn 2009) $16,000
1/2/10 Patenet purchased (10year life) $84,000
3/1/10 Cost of developing a secret formula $ 75,000
4/1/10 Goodwill purchased (indefinte) $278,400
6/1/10 Legal fee for successful defense of patent purchased above $12,650
9/1/10 Research and development cost $160,00


So I understand the first few steps, but the amorization steps lose me!

Limited life intagable $48,000
Intagible Asset $48,000

Amorization $____________



Prepaid Rents $24,000
Intangible assets $24,000

And I am so upset .to go help

[morgaine300]

Hmm, trickier than I thought. :-) First you need to separate out what is actually tangible and what is not. I'm not positive of all of them myself cause I don't really work with this type of stuff. I also don't know where you are. I'm in the U.S. and don't know how different any international rules are on this, so anything I say is from U.S. standpoint.

Unless you have information stating otherwise do the amortization straight-line. That is, just figure out the life and divide evenly into the number of years. Keep in mind you're doing the end of 2010, so you need to figure to that date. For something like the patent that is easy because it was purchased at the beginning of that year, so you just have one year's worth. Some of the items you will have to figure out how many months has gone by. It might be easier to figure out how many months the life is, divide by months, and then count how many months from purchase to end of 2010.

In terms of the entries, I'm not sure I really get that. If all that was lumped into one account, you still need to credit it all out. However, if you try to record amortization it's not going to balance. I guess I don't get whether any of them were recorded at the current NET amounts. It's a rather odd problem, not like something I've seen before. (Have you learned prior period adjustments?)

As for the individual items, franchise is intangible. The prepaid rent it looks like you're already trying to move to the correct place. The patent and goodwill are intangible. The goodwill will not be amortized. R&D costs are generally expensed. There's a little which can be capitalized, but since there are no details, you'll have to assume that's all expense.

The secret formula costs I don't think are an intangible. The patent itself would be, but I believe internal costs to get there are expensed. The legal defense thing I cannot remember and would have to look up. So those are a bit questionable.

Now that 2009 loss -- I don't get that at all. I don't see how any of that is intangible and I'm not sure what they're getting at. It says "including," which is leading me to believe it was already expense in 2009 and you wouldn't have to do anything to it.

You may have to do a little hunting in your book and see if you can find some similar examples and see how they handled, but I'm honestly not quite sure exactly how they're wanting you to deal with the entry. If I had the real books sitting in front of me and knew exactly what was going on, I could deal with it. But sometimes with problems it's a bit difficult to understand what they're trying to say.

Perhaps someone else can chime in and see what their opinion is.

[morgaine300]

Well, I find the legal fees pretty quick. That does get added to the patent itself. What you want to do with the amortization of that is look at how much life exists at the time the legal fees were incurred. That is, the patent expires 1/2/20, so think of the legal fees as having a life from 6/2010 to that date.