Acquisition of Intangible Assets
Transactions during 2008 of the newly organized Menlove Corporation included the following:
Jan. 2 Paid legal fees of $15,000 and stock certificate costs of $8,300 to complete organization of the corporation.
15 Hired a clown to stand in front of the corporate office for two weeks and hand out pamphlets and candy to create goodwill for the new enterprise. Clown cost, $1,000; pamphlets and candy, $500.
Apr. 1 Patented a newly developed process with costs as follows:
Legal fees to obtain patent
Patent application and licensing fees
It is estimated that in six years other companies will have developed improved processes, making the Menlove Corporation process obsolete.
May 1 Acquired both a license to use a special type of container and a distinctive trademark to be printed on the container in exchange for 600 shares of Menlove Corporation no-par common stock selling for $50 per share. The license is worth twice as much as the trademark, both of which may be used for six years.
July 1 Constructed a shed for $131,000 to house prototypes of experimental models to be developed in future research projects.
Dec. 31 Incurred salaries for an engineer and chemist involved in product development totaling $175,000 in 2008.
1. Give journal entries to record the preceding transactions. (Ignore amortization of intangible assets.)
2. Present the Intangible Assets section of Menlove Corporation’s balance sheet at December 31, 2008.
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