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at December 31, 2021, Prepare an income stalement for the year ended December Assume a 35% average income tax rate. AICPA adapted Problem 13-62 Brannen Manufacturing Corporation was incorporated on January 3, 2020. The corporation's financial Recording Entries for nangbie Assens LO1, ments for its first year's operations were not examined by a CPA. We have been engaged to examine the 2, 3, 4 state- to examine the fi statements for the year ended December 31, 2021, and our examination is substantially completed tion's adjusted trial balance appears as follows. corpora- 13-38 Chapter 13 Imtangible Assess and Goodwill Adjusted Trial Balance December 31, 2021 Cash DebitCredit S 11,000 68,500 $ 500 Inventories Equipment Patents 38,500 80,000 29,00010,000 102,000 10,500 24,000 24,000 50,000 59,000 Licensing agreement 2.... Deferred revenue Capital stock Retained eamings, January 1, 2021 Sales revenue. Cost of goods sold Selling and general expenses 147,500 12,500 317,000 7000 668500 454,000668 173,000 3,500 Other expenses Totals $1.156.000 $1,156,000 The following information relates to accounts that may still require adjustment. 1. Patents for Brannen's manufacturing process were acquired January 2, 2021, for $68,000. An additional $34,000 was spent in December 2021, to defend the patent and was included in the cost of patents. The com- pany was not successful in defending the patent 2. The balance in the Franchise account properly reflects the carrying value of a franchise payment made on January 1, 2020, for a 5-year term. No amortization has yet been recorded in 2021. 3. On January 3, 2020, Brannen purchased Licensing Agreement 1, which was believed to have an indefinite useful life. The balance in the Licensing Agreement 1 account includes its purchase price of $48,000 and costs of $2.000 related to the acquisition. On January 1, 2021, Brannen bought Licensing Agreement 2, which has a life expectancy of 10 years. The halance in the Licensing Agreement 2 account includes the $58,000 purchase price and $2,000 in acquisition costs, but it has been reduced by a credit of $1,000 for the advance collection of 2022 revenue from the agreement. No amortization on License Agreement 2 has been recorded. 4. In carly 2021, an explosion caused a permanent reduction in the expected revenue producing value of Li- censing Agreement. The fair value of the agreement is estimated at 60% of its carrying value. No entry has been made for the explosion in 2021. 5. The balance in the Goodwill account includes (1) $8,000 paid December 30, 2020, for an advertising program that management believes will assist in increasing Brannen's sales over a period of three to five years following the disbursement and (2) legal expenses of $16,000 incurred for Brannen's incorporation on January 3,2020. Required Prepare journal entries as of December 31, 2021, as required by the information provided above. Ignore income taxes. AICPA adapted

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