Prepare a schedule showing the intangible section of Lewis’s balance sheet at December 31, 2011.

Intangible section of Lewis’s balance sheet at December 31, 2011:

Patent: Cost: $4,000,000 Accumulated Amortization: (1/8 x 3) x $4,000,000 = $1,500,000 Net Book Value: $4,000,000 – $1,500,000 = $2,500,000

Cost of Franchise: 360,000 Amortization Accumulated Value: $360,000

Research and Development costs: Cost: $535555 Accumulated amortization: $0 Net Value: $535555

For the 12/31/2011 year, income statement effects:

Amortization Expense: Patent: (1/5 x 1) x $4,000,000 = $800,000 Franchise: $360,000 Total Amortization Expense: $800,000 + $360,000 = $1,160,000

Franchise Fees: 8% x $1,950,000 = $156,000

It’s important to note that the above calculations are based on the information provided, and any further assumptions or estimates used would be based on the company’s accounting policies and regulations.