Question: Monsecours Corp., a public company incorporated on
Monsecours Corp., a public company incorporated on June 28, 2016, set up a single account for all of its intangible assets. The following summary discloses the debit entries that were recorded during 2016 and 2017 in that account:
The new business started up on July 2, 2016. No amortization was recorded for 2016 or 2017. The goodwill purchased on April 1, 2017, includes in-process development costs that meet the six development stage criteria, valued at $175,000. The company estimates that this amount will help it generate revenues over a 10-year period.
Instructions:
(a) Prepare the necessary entries to clear the intangible assets account and to set up separate accounts for distinct types of intangibles. Make the entries as at December 31, 2017, and record any necessary amortization so that all balances are appropriate as at that date. State any assumptions that you need to make to support your entries.
(b) In what circumstances should goodwill be recognized? From the perspective of an investor, does the required recognition and measurement of goodwill provide useful financial statement information?
Transcribed Image Text:
Intangible Assets–MONSECOURS July 1, 2016 1 Oct. $ 35,000 25,000 8-year franchise; expiration date of June 30, 2024 Advance payment on leasehold (2-year lease) Net loss for 2016 including incorporation fee, $1,000; related legal fees of organizing, $5,000; expenses of recruiting and training staff for start-up of new business, $3,800 Dec. 31 17,000 65,400 86,000 287,500 13,350 75,000 2,775 Feb. 15, 2017 Patent purchased (10-year life) Mar. 1 Аpr. June 1 Dec. 31 31 Direct costs of acquiring a 5-year licensing agreement Goodwill purchased (indefinite life) Legal fee for successful defence of patent (see above) Costs of research department for year Royalties paid under licensing agreement (see above)
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