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(TCO C) What are intangible assets? How are limited-life intangibles accounted for subsequent to acquisition?
(TCO C) What are intangible assets?
How are limited-life intangibles accounted for subsequent to acquisition?
On January 1, 2018, Molden Co. signed an agreement to operate as a franchisee of Mold Removal Co. for an initial franchise fee of $100,000. The agreement provides that the fee is not refundable and no future services are required of the franchisor. The agreement also provides that 5% of the Revenue from the franchise must be paid to the franchisor annually. Molden's revenue from the franchise for 2018 was $1,800,000. Molden estimates the useful life of the franchise to be 10 years.
Instructions:
1. Show a schedule of what should be shown in the Intangible Assets Section of Molden's Balance Sheet at December 31, 2018. Show supporting computations in good form.
2. Show a schedule showing all the expenses resulting from these transactions that would appear on Molden's Income Statement for the year ended December 31, 2018. Show supporting computations please.
