On January 1 of the current year, Lemon Meyer Corporation purchases the net assets of Vivien's unincorporated business for $1,100,000. The tangible net assets have a $400,000 book value and a $500,000 FMV. The purchase agreement states that Vivien will not compete with Lemon Meyer Corporation by starting a new business in the same area for a period of five years. The stated consideration received by Vivien for the covenant not to compete is $80,000. Other intangible assets included in the purchase agreement are as follows. E (Click the icon to view the other intangible assets.) Read the requirements Requirement a. How would Vivien's assets be recorded for tax purposes by Lemon Meyer Corporation? Recorded value Tangible assets - X Data table Intangible assets: Covenant not to compete • Goodwill: $400,000 • Patents (13-year remaining useful life): $70,000 • Customer list $50,000 Goodwill Patents Customer list Total Print Done

On January 1 of the current year, Lemon Meyer Corporation purchases the net assets of Vivien's unincorporated business for $1,100,000. The tangible net assets have a $400,000 book value and a $500,000 FMV. The purchase agreement states that Vivien will not compete with Lemon Meyer Corporation by starting a new business in the same area for a period of five years. The stated consideration received by Vivien for the covenant not to compete is $80,000. Other intangible assets included in the purchase agreement are as follows. E (Click the icon to view the other intangible assets.) Read the requirements Requirement a. How would Vivien's assets be recorded for tax purposes by Lemon Meyer Corporation? Recorded value Tangible assets - X Data table Intangible assets: Covenant not to compete • Goodwill: $400,000 • Patents (13-year remaining useful life): $70,000 • Customer list $50,000 Goodwill Patents Customer list Total Print Done

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Carla Vista Co. sells $647,600 of receivables with a fair value of $659,400 to Carla Vista Trust in a securitization transaction that meets the criteria for a sale. Carla Vista Co. receives full fair value for the receivables and agrees to continue to service them, estimating that the fair value of this service liability component is $26,930. Prepare the journal entry for Carla Vista Co. to record the sale.
On January 1, 20x1, Entity A acquires all the assets and liabilities of Entity B for P2,000,000. Entity B's identifiable assets and liabilities have fair values of P4,000,000 and P2,200,000, respectively. Additional information: Prior to the business combination, Entity B is a franchisee of Entity A. The franchise agreement has a remaining term of 5 years, which either party can terminate without any penalty. The franchise agreement has a fair value of P300,000, of which P100,000 is the "at-market" value. The "off-market" value is favorable to Entity A, but unfavorable to Entity B. Entity A's related 'contract liability' account has a carrying amount of P230,000, while Entity B's related 'franchise' account has a carrying amount of P150,000. Requirement: Compute for the goodwill.
Ramirez Company has a held-for-collection investment in the 6%, 20-year bonds of Soto Company. The investment was originally purchased for $1,200,000 in 2019. Early in 2020, Ramirez recorded an impairment of $300,000 on the Soto investment, due to Soto's financial distress. In 2021, Soto returned to profitability and the Soto investment was no longer impaired. What entry does Ramirez make in 2021 under (a) GAAP and (b) IFRS?
Rahul
Shimmer Inc. is a calendar-year-end, accrual-method corporation. This year, it sells the following long-term assets: Asset Sales Price Cost Accumulated Depreciation Building $752,000 $749,000 $34,000 Sparkle Corporation stock 219,000 256,000 n/a Shimmer does not sell any other assets during the year, and its taxable income before these transactions is $847,000. What are Shimmer's taxable income and tax liability for the year? Taxable income: Tax Liability:
Sunland Inc. is a private corporation following ASPE. On January 2, 2022 it purchased a limited-life licence for $50600. This licence has a 10-year life that is NOT renewable. The company uses straight-line amortization and on December 31, 2023, Sunland estimates that the undiscounted net cash flows of this licence is $38300, while the fair value (discounted net future cash flows) is $34200. What is the impairment loss? ONil, the asset is not impaired $2180 $6280 $12300
On the effective date of the Bravo Corporation's (the Company) S Corporation election (January 1, 2020) the Company had a built in gain with respect to certain real estate held by the Corporation on that date of $100,000. The Company had zero basis in the real estate and it was appraised for $100,000. One year later (January 1, 2021) this built in gain was realized when the Company sold the real estate to an unrelated party $100,000 and there were no expenses associated with the sale. For the Company's calendar year 2021, the Company has, exclusive of this gain, taxable income of $2,000,000. Required: 1. Calculate the built-in gains tax (Federal) that will be paid by Bravo Corporation with its 2021 tax return as a result of the sale of this real estate. 2. Calculate the amount of gain that will be passed through to the Company's shareholders related to this sale.
Leah transfers equipment (basis of $400,000 and fair market value of $500,000) for additional stock in Crow Corporation. After the transfer, Leah owns 80% of Crow's stock. Associated with the equipment is Section 1245 depreciation recapture potential of $70,000. As a result of the transfer, Leah recognizes ordinary income of $70,000. the Section 1245 depreciation recapture potential carries over to Crow Corporation. the Section 1245 depreciation recapture potential disappears. Leah recognizes ordinary income of $70,000 and 1231 gain of $30,000. None of the above
Mighty Company purchased a 60 percent interest in Lowly Company on January 1, 2017, for $567,600 in cash. Lowly's book value at that date was reported as $760,000 and the fair value of the noncontrolling interest was assessed at $378,400. Any excess acquisition-date fair value over Lowly's book value is assigned to trademarks to be amortized over 20 years. Subsequently, on January 1, 2018, Lowly acquired a 20 percent interest in Mighty. The price of $440,000 was equivalent to 20 percent of Mighty's book and fair value. Neither company has paid dividends since these acquisitions occurred. On January 1, 2018, Lowly's book value was $992,000, a figure that rises to $1,054,500 (common stock of $300,000 and retained earnings of $754,500) by year-end. Mighty's book value was $2.20 million at the beginning of 2018 and $2.30 million (common stock of $1 million and retained earnings of $1,300,000) at December 31, 2018. No intra-entity transactions have occurred and no additional stock has been…
Grier purchased Walters Company several years ago. Walters become a reporting unit of Griers. At the end of 2020, Grier had a net book value of $1.6 million which includes $400,000 of goodwill. A goodwill impairment test is done as part of the year-end closing process. Grier estimates the fair value of Walters to be $1.4 million. The fair value of Walters identifiable net assets, excluding goodwill, is $1.3 million.Required:1. Determine if goodwill should be impaired.2. Prepare the journal entry required for the impairment, if necessary.
Pearl acquires 90% of the voting stock of Spruce on January 1, 2020 for $5,000. The fair value of the noncontrolling interest is $550. Spruce's equity is reported at $4,800 at the date of acquisition. Its net assets are reported at amounts approximating fair value, but it has previously unreported identifiable intangible assets (5-year life, straight-line), valued at $1,000. Pearl uses the complete equity method to account for its investment. Spruce reports net income of $300 for 2020. On the 2020 consolidation working paper, what is the credit to noncontrolling interest in eliminating entry (R)? A. B. C. D. $80 $65 $85 $70
Heron Company purchases commercial realty on November 13, 2002, for $650,000. Straight-line depreciation of $287,492 is claimed before the property is sold on February 22, 2020, for $850,000. What are the tax consequences of the sale of realty if Heron is: A C corporation?