Herzogg Company, organized in 2008, has the following transactions related to

intangible assets. 1/2/08 Purchased patent (7-year life) $560,000 4/1/08 Goodwill
purchased (indefinite life) 360,000 7/1/08 10-year franchise; expiration date 7/1/2018
440,000 9/1/08 Research and development costs 185,000 Instructions Prepare the
necessary entries to record these intangibles. All costs incurred were for cash. Make the
adjusting entries as of December 31, 2008, recording any necessary amortization and
reporting all intangible asset balances accurately as of that date.

1/2/08 Patents................................................................................. 560,000

Cash...........................................................................
560,000

4/1/08 Goodwill.............................................................................. 360,000

Cash...........................................................................
360,000
  (Part of the entry to record
   purchase of another company)

7/1/08 Franchise............................................................................. 440,000

Cash...........................................................................
440,000

9/1/08 Research and Development Expense................................ 185,000

Cash...........................................................................
185,000

12/31/08 Amortization Expense—Patent.........................................  80,000

  ($560,000 ÷ 7)
Amortization Expense—Franchise....................................  22,000
  [($440,000 ÷ 10) X 1/2]
Patents..................................................................
 80,000
Franchise..............................................................
 22,000

Ending balances, 12/31/08:

Patent = $480,000 ($560,000 – $80,000).
Goodwill = $360,000
Franchise = $418,000 ($440,000 – $22,000).
R&D expense = $185,000