Problem 1: CENTER COMPANY

Required:
1. Prepare correcting entry to record the intangible assets on January 1, 2022.

Copyright 620,000 1
Patend 400,000
Retained earnings 1,020,000

Copyright 1 400,000
Less: Amoritization from 1/1/2016 to 12/31/2019
(400,000 / 20 x 4) -80,000
Carrying amount 320,000

Copyright 2 360,000 2
Less: Amortization from 7/1/2017 to 12/31/2019
(360,000 / 15 x 2.5) -60,000
Carrying amount 300,000 3

Patent 500,000
Less: Amortization for 2018 and 2019 4
(500,000 /10 x 2) -100,000
Carrying amount 400,000

2. Prepare journal entry to record amortization of intangible assets for 2022.

Amortization of copyright (20,000 + 24,000) 44,000

Amortization of patent 50,000
Copyright 44,000
Patent 50,000
Problem 2: DINE COMPANY
Required:
Prepare journal entries on the books of the franchisee for the current year.

Franchise (3,000,000 + 3,790,000) 6,790,000

Discount on note payable 1,210,000
Cash 3,000,000
Note payable 5,000,000

Note payable 5,000,000

Present value of note (1,000,000 x 3.79) -3,790,000
Implied interest 1,210,000

Amortization of franchise 679,000

Franchise (6,790,000 / 10) 679,000

Note payable 1,000,000

Cash 1,000,000

Interest expense (10% x 3,790,000) 379,000

Discount on note payable 379,000