Recording Goodwill upon Acquisition On January 1, 2020, the balance sheet of Naperville Company (a sole proprietorship) was as follows. Assets Liabilities Accounts receivable (net of allowance) $24,000 Current $15,200 Inventory 36,000 Noncurrent 32,000 $47,200 Plant and equipment (net of depreciation) 80,000 Equity Land 12,000 Owners' equity 104,800 Total $152,000 Total liabilities and owners' equity $152,000 On January 1, 2020, Chicago Corporation purchased all of the assets and assumed all of the liabilities listed on the above balance sheet for $116,000 cash. The assets, on date of purchase, were valued by Chicago Corporation as follows: accounts receivable (net), $20,000; inventory, $34,000; plant and equipment (net), $80,000; and land, $18,000. In addition, Chicago Corporation estimated purchased intangible assets of $800 for customer list and $3,200 for trade names (both previously unrecorded). The liabilities were valued at their carrying amounts. Required a. Compute the amount of goodwill included in the purchase price paid by Chicago Corporation. $ 7,200 b. Provide the entry that Chicago Corporation should make to record the purchase of Naperville Company. Account Name Dr. 20,000 v Cr. Accounts Recelvable (net) Inventory 34,000 v Plant and Equipment (net) 80,000 v Land 18,000 v Intangible Asset-Customer List 800 v Intangible Asset-Trade names 3,200 v Goodwill 7,200 Current Liabilities 15,200 v Noncurrent Liabilities 32,000 v Cash 116,000 v c. What is the minimum amount of goodwill that Chicago Corporation can amortize at the end of 2020? $ 720
Recording Goodwill upon Acquisition On January 1, 2020, the balance sheet of Naperville Company (a sole proprietorship) was as follows. Assets Liabilities Accounts receivable (net of allowance) $24,000 Current $15,200 Inventory 36,000 Noncurrent 32,000 $47,200 Plant and equipment (net of depreciation) 80,000 Equity Land 12,000 Owners' equity 104,800 Total $152,000 Total liabilities and owners' equity $152,000 On January 1, 2020, Chicago Corporation purchased all of the assets and assumed all of the liabilities listed on the above balance sheet for $116,000 cash. The assets, on date of purchase, were valued by Chicago Corporation as follows: accounts receivable (net), $20,000; inventory, $34,000; plant and equipment (net), $80,000; and land, $18,000. In addition, Chicago Corporation estimated purchased intangible assets of $800 for customer list and $3,200 for trade names (both previously unrecorded). The liabilities were valued at their carrying amounts. Required a. Compute the amount of goodwill included in the purchase price paid by Chicago Corporation. $ 7,200 b. Provide the entry that Chicago Corporation should make to record the purchase of Naperville Company. Account Name Dr. 20,000 v Cr. Accounts Recelvable (net) Inventory 34,000 v Plant and Equipment (net) 80,000 v Land 18,000 v Intangible Asset-Customer List 800 v Intangible Asset-Trade names 3,200 v Goodwill 7,200 Current Liabilities 15,200 v Noncurrent Liabilities 32,000 v Cash 116,000 v c. What is the minimum amount of goodwill that Chicago Corporation can amortize at the end of 2020? $ 720
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:**Recording Goodwill upon Acquisition**
On January 1, 2020, the balance sheet of Naperville Company (a sole proprietorship) was as follows:
### Assets
- **Accounts receivable (net of allowance):** $24,000
- **Inventory:** $32,000
- **Plant and equipment (net of depreciation):** $80,000
- **Land:** $16,000
**Total Assets:** $152,000
### Liabilities
- **Current Liabilities:** $15,200
- **Noncurrent Liabilities:** $32,000
**Total Liabilities:** $47,200
### Equity
- **Owners' equity:** $104,800
**Total Liabilities and Owners' Equity:** $152,000
---
On January 1, 2020, Chicago Corporation purchased all of the assets and assumed all of the liabilities listed above for $116,000 cash. The assets, on date of purchase, were valued by Chicago Corporation as follows: accounts receivable (net), $20,000; inventory, $34,000; plant and equipment (net), $80,000; and land, $18,000. In addition, Chicago Corporation estimated purchased intangible assets of $800 for customer list and $3,200 for trade names (both previously unrecorded). The liabilities were valued at their carrying amounts.
**Required:**
**a.** Compute the amount of goodwill included in the purchase price paid by Chicago Corporation.
- **Goodwill:** $7,200
**b.** Provide the entry that Chicago Corporation should make to record the purchase of Naperville Company.
| Account Name | Dr. | Cr. |
|-------------------------------|----------|-----------|
| Accounts Receivable (net) | 20,000 | |
| Inventory | 34,000 | |
| Plant and Equipment (net) | 80,000 | |
| Land | 18,000 | |
| Intangible Asset—Customer List| 800 | |
| Intangible Asset—Trade names | 3,200 | |
| Goodwill | 7,200 | |
| | | |
| Current Liabilities | | 15,200 |
| Noncurrent Liabilities | | 32,000 |
| Cash
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