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# Miklos Company was formed in January 2018 and is preparing its financial statements in compliance with...

###### Question:

Miklos Company was formed in January 2018 and is preparing its financial statements in compliance with GAAP for the first time at the end of 2020. The company’s general ledger at December 31, 2020 includes the following balances:

Patent $120,000 Copyright 140,000 Trade Name 150,000 Computer Software 90,000 Start-up Costs 30,000 Intellectual Capital 150,000 Goodwill 90,000 As a recently hired accountant for Miklos, you have been asked to make sure that the company’s accounting for intangible assets follow GAAP. Based on your investigation, you determine the following: a. The patent was acquired in January 2020 has an expected life of 15 years and no residual value. It is expected to generate approximately equal benefits each year. b. Miklos will use the copyright and trade name for the foreseeable future. c. The company software was purchased in April 2020 and is used in the Miklos’s 20 offices around the country. It is expected to be replaced with new software in April 2022. d. Miklos previous capitalized the expected value of its “human resources” as intellectual capital, with a corresponding increase to additional paid in capital. e. The trade name and goodwill arose from an acquisition of a subsidiary company at the end of 2019. Because of a significant adverse change in the market, you decide that both these assets are impaired. You estimate that the fair value of the trade name is$50,000. The subsidiary company, which qualifies as a reporting unit, has a book value of $500,000, including the goodwill of$90,000. You estimate the subsidiaries fair value is $300,000, of which$250,000 is allocated to its identifiable assets and liabilities.

Instructions:

1. Assuming no adjusting entries have been made, prepare the adjusting journal entries to provide the correct information at the end of 2020.

2. Determine the balance for each intangible asset that will be reported on Miklos’s December 31, 2020 Balance sheet.

3. Identify the accounts and associated amounts that would be shown of Miklos’s December 31, 2020 Income Statement under expenses.

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