Munn Inc. had the following intangible account balance at December 31, 2018:
Patent …………………….$168,000
Information relating to Munn’s patent and transactions involving other during 2019 includes the following:
a. The patent was purchased from Grey Company for $192,000 on January 1, 2017, at which time the remaining legal life was 16 years. On January 1, 2019, Munn determined that the useful life of the patent was only 8 years from the date of acquisition.
b. On January 2, 2019, in connection with the purchase of a trademark from Cody Corporation, the parties entered into a noncompete agreement and a consulting contract. Munn paid Cody $800,000, of which three-quarters was for the trademark and one-quarter was for Cody’s agreement not to compete for a 5-year period in the line of business covered by the trademark. Munn considers the life of the trademark to be indefinite.
Under the consulting contract, Munn agreed to pay Cody $50,000 annually on January 2 for 5 years.
The first payment was made on January 2, 2019. The trademark is not impaired at the end of 2019.
Required:
1. Prepare a schedule of the expenses for 2019 relating to Munn’s intangible asset balances at December 31, 2018, and transactions during 2019.
2. Prepare the section of Munn’s at December 31, 2019.
