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For the year-ended December 31, 2020 Funky Winker Bean Co. recorded $25,000 of goodwill to reflect the increased value of its brand due to its very successful marketing campaign. The goodwill is estimated to have a life of only 2 years since marketing campaigns have a short effective life. Funky Winker Bean Co. also recorded $30,000 for the cost of a patent that it purchased on January 1 from a bankrupt competitor. The patent has an indefinite life. Funky recorded patent amortization of $6,000 in the year. Required: Comment on the appropriateness of the accounting by Funky Winker Bean Co. for 1) goodwill, & 2) the patent. Be concise and to the point.

For the year-ended December 31, 2020 Funky Winker Bean Co. recorded $25,000 of goodwill to reflect the increased value of its brand due to its very successful marketing campaign. The goodwill is estimated to have a life of only 2 years since marketing campaigns have a short effective life. Funky Winker Bean Co. also recorded $30,000 for the cost of a patent that it purchased on January 1 from a bankrupt competitor. The patent has an indefinite life. Funky recorded patent amortization of $6,000 in the year. Required: Comment on the appropriateness of the accounting by Funky Winker Bean Co. for 1) goodwill, & 2) the patent. Be concise and to the point.

FINANCIAL ACCOUNTING
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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Short answer question 3 For the year-ended December 31, 2020 Funky Winker Bean Co. recorded $25,000 of goodwill to reflect the increased value of its brand due to its very successful marketing campaign. The goodwill is estimated to have a life of only 2 years since marketing campaigns have a short effective life. Funky Winker Bean Co. also recorded $30,000 for the cost of a patent that it purchased on January 1 from a bankrupt competitor. The patent has an indefinite life. Funky recorded patent amortization of $6,000 in the year. Required: Comment on the appropriateness of the accounting by Funky Winker Bean Co. for 1) goodwill, & 2) the patent. Be concise and to the point.
Transcribed Image Text:Short answer question 3 For the year-ended December 31, 2020 Funky Winker Bean Co. recorded $25,000 of goodwill to reflect the increased value of its brand due to its very successful marketing campaign. The goodwill is estimated to have a life of only 2 years since marketing campaigns have a short effective life. Funky Winker Bean Co. also recorded $30,000 for the cost of a patent that it purchased on January 1 from a bankrupt competitor. The patent has an indefinite life. Funky recorded patent amortization of $6,000 in the year. Required: Comment on the appropriateness of the accounting by Funky Winker Bean Co. for 1) goodwill, & 2) the patent. Be concise and to the point.
Short answer question 3 For the year-ended December 31, 2020 Funky Winker Bean Co. recorded $25,000 of goodwill to reflect the increased value of its brand due to its very successful marketing campaign. The goodwill is estimated to have a life of only 2 years since marketing campaigns have a short effective life. Funky Winker Bean Co. also recorded $30,000 for the cost of a patent that it purchased on January 1 from a bankrupt competitor. The patent has an indefinite life. Funky recorded patent amortization of $6,000 in the year. Required: Comment on the appropriateness of the accounting by Funky Winker Bean Co. for 1) goodwill, & 2) the patent. Be concise and to the point.
Transcribed Image Text:Short answer question 3 For the year-ended December 31, 2020 Funky Winker Bean Co. recorded $25,000 of goodwill to reflect the increased value of its brand due to its very successful marketing campaign. The goodwill is estimated to have a life of only 2 years since marketing campaigns have a short effective life. Funky Winker Bean Co. also recorded $30,000 for the cost of a patent that it purchased on January 1 from a bankrupt competitor. The patent has an indefinite life. Funky recorded patent amortization of $6,000 in the year. Required: Comment on the appropriateness of the accounting by Funky Winker Bean Co. for 1) goodwill, & 2) the patent. Be concise and to the point.
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