A-2 Dynamo Manufacturing paid cash to acquire the assets of an existing company. Among the assets acquired were the following items.Patent with 4 remaining years of legal lifeGoodwill$40,20040,900Dynamo's financial condition just prior to the acquisition of these assets is shown in the following statements model.Balance SheetAssetsCash + Patent +94,900 +ΝΑ+RequiredGoodwillΝΑStockholders'= Liabilities + Equity=ΝΑ+94,900RevenueΝΑIncome Statement-ExpensesΝΑ=NetIncomeΝΑStatementof CashFlowsΝΑa. Compute the annual amortization expense for these items.b. Show the acquisition of the intangible assets and the related amortization expense for Year 1 in a horizontal statements model.c. Prepare the journal entries to record the acquisition of the intangible assets and the related amortization for year 1.

ANSWERPatent value = $40,200Goodwill = $40900Useful life of patent = 4 yearsAmortization of…

Dynamo Manufacturing paid cash to acquire the assets of an existing company. Among the assets acquired were the following items. Patent with 4 remaining years of legal life Goodwill $40,200 40,900 Dynamo's financial condition just prior to the acquisition of these assets is shown in the following statements model. Balance Sheet Income Statement Assets Cash + Patent + 94,900 + ΝΑ + Required Goodwill = Liabilities + ΝΑ = ΝΑ Stockholders' Equity + 94,900 Revenue ΝΑ - Expenses ΝΑ = Net Income ΝΑ Statement of Cash Flows ΝΑ a. Compute the annual amortization expense for these items. b. Show the acquisition of the intangible assets and the related amortization expense for Year 1 in a horizontal statements model. c. Prepare the journal entries to record the acquisition of the intangible assets and the related amortization for year 1.

Dynamo Manufacturing paid cash to acquire the assets of an existing company. Among the assets acquired were the following items. Patent with 4 remaining years of legal life Goodwill $40,200 40,900 Dynamo's financial condition just prior to the acquisition of these assets is shown in the following statements model. Balance Sheet Income Statement Assets Cash + Patent + 94,900 + ΝΑ + Required Goodwill = Liabilities + ΝΑ = ΝΑ Stockholders' Equity + 94,900 Revenue ΝΑ - Expenses ΝΑ = Net Income ΝΑ Statement of Cash Flows ΝΑ a. Compute the annual amortization expense for these items. b. Show the acquisition of the intangible assets and the related amortization expense for Year 1 in a horizontal statements model. c. Prepare the journal entries to record the acquisition of the intangible assets and the related amortization for year 1.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

A-2

Dynamo Manufacturing paid cash to acquire the assets of an existing company. Among the assets acquired were the following items.
Patent with 4 remaining years of legal life
Goodwill
$40,200
40,900
Dynamo's financial condition just prior to the acquisition of these assets is shown in the following statements model.
Balance Sheet
Assets
Cash + Patent +
94,900 +
ΝΑ
+
Required
Goodwill
ΝΑ
Stockholders'
= Liabilities + Equity
=
ΝΑ
+
94,900
Revenue
ΝΑ
Income Statement
-
Expenses
ΝΑ
=
Net
Income
ΝΑ
Statement
of Cash
Flows
ΝΑ
a. Compute the annual amortization expense for these items.
b. Show the acquisition of the intangible assets and the related amortization expense for Year 1 in a horizontal statements model.
c. Prepare the journal entries to record the acquisition of the intangible assets and the related amortization for year 1.

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