Financial Accounting: P9-8B Due to rapid turnover in the accounting department (Wasp Company)
Financial Accounting P9-8B Rectification of errors Due to rapid turnover in the accounting department, a number of transactions involving intangible assets were improperly recorded by Wasp Company in 2011. 1. Wasp developed a new manufacturing process, incurring research and development costs of $110,000. The company also purchased a patent for $50,000. In early January, Wasp capitalized $160,000 as the cost of the patents. Patents amortization expense of $8,000 was recorded based on a 20-year useful life. 2. On July 1, 2011, Wasp purchased a small company and as a result acquired goodwill of $200,000.Wasp recorded a half-year’s amortization in 2011, based on a 50-year life ($2,000 amortization).The goodwill has an indefinite life.