Question

Exercise 5 As the recently appointed auditor for Swifty Corporation, you have been asked to examine selected accounts before the 6-month financial statements of June 30, 2017, are prepared. The controller for Swifty Corporation mentions that only one account is kept for intangible assets. The account is shown below. Intangible Assets Debit Credit Balance Research and development costs 951,000 951,000 Jan. 4 Jan. 5 Legal costs to obtain patent 77,040 1,028,040 Jan. 31 Payment of 7 months' rent on property 84,000 leased by Bryan 1,112,040 Feb. 11 Premium on common stock 251,000 861,040 March 31 Unamortized bond discount on bonds due March 31, 2037 134,400 995,440 April 30 Promotional expenses related to start-up of business 222,500 1,217,940 June 30 Operating losses for first 6 months 245,000 1,462,940 Prepare the entries necessary to correct this account. Assume that the patent has a useful life of 10 years. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select “No Entry” for the account titles and enter 0 for the amounts.)