What amount should be recorded as acquisition cost of ABC Company? a. 2,535,000 b. 2,100,000 c. 2,315,000 d. 2,305,000
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Topic: Intangible Assets (
Sarrah Company is interested in computing the goodwill to be recognized in the purchase of ABC Company in January 2022. The following information was taken from the records of ABC Company:
Net Income Net Assets
2017 360,000 1,600,000
2018 388,000 1,800,000
2019 288,000 1,900,000
2020 380,000 2,000,000
2021 394,000 2,100,000
1,810,000 9,400,000
Goodwill is measured by capitalizing excess earnings at 40% with normal return on average net assets at 10%.
What amount should be recorded as acquisition cost of ABC Company?
a. 2,535,000
b. 2,100,000
c. 2,315,000
d. 2,305,000
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Solved in 2 steps
- Measuring and recording goodwill Princeton has acquired several other companies. Assume that Princeton purchased Kelleher for $9,000,000 cash. The book value of Kelleher’s assets is $19,000,000 (market value, $20,000,000), and it has liabilities of $12,000,000 (market value, $12,000,000). Requirements Compute the cost of the good-will purchased by Princeton. Record the purchase of Kelleher by Princeton.The following information relates to the intangible assets of Lettuce Express:a. On January 1, 2021, Lettuce Express completed the purchase of Farmers Produce, Inc., for $1,600,000 in cash. The fair value of the identifiable net assets of Farmers Produce was $1,440,000.b. Included in the assets purchased from Farmers Produce was a patent for a method of processing lettuce valued at $49,500. The original legal life of the patent was 20 years. There are still 17 years left on the patent, but Lettuce Express estimates the patent will be useful for only 9 more years.c. Lettuce Express acquired a franchise on July 1, 2021, by paying an initial franchise fee of $216,000. The contractual life of the franchise is eight years.Required:1. Record amortization expense for the intangible assets at December 31, 2021.2. Prepare the intangible asset section of the December 31, 2021, balance sheet.Intangibles: Balance Sheet Presentation and Income Statement Effects Clinton Company has provided information on intangible assets as follows: A patent was purchased from Lou Company for $1,680,000 on January 1, 2018. Clinton estimated the remaining useful life of the patent to be 10 years. The patent was carried in Lou's accounting records at a net book value of $1,440,000 when Lou sold it to Clinton. During 2019, a franchise was purchased from Rink Company for $500,000. In addition, 6% of revenue from the franchise must be paid to Rink. Revenue from the franchise for 2019 was $1,800,000. Clinton estimates the useful life of the franchise to be 10 years and takes a full year's amortization in the year of purchase. Clinton incurred R&D costs in 2019 as follows: Materials and equipment $125,000 Personnel 162,000 Indirect costs 78,000 $365,000 Clinton estimates that these costs will be recouped by December 31, 2020. On January 1, 2019, Clinton estimates, based on new…
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- Wildhorse Corporation acquired End-of-the-World Products on January 1, 2020 for $6250000, and recorded goodwill of $1170000 as a result of that purchase. At December 31, 2021, the End-of-the-World Products Division had a fair value of $4580000. The net identifiable assets of the Division (including goodwill) had a carrying value of $5290000 at that time. What amount of loss on impairment of goodwill should Wildhorse record in 2021?Carla Vista Corporation acquired End-of-the-World Products on January 1, 2020 for $6150000, and recorded goodwill of $1150000 as a result of that purchase. At December 31, 2021, the End-of-the-World Products Division had a fair value of $4482000. The net identifiable assets of the Division (including goodwill) had a carrying value of $5190000 at that time. What amount of loss on impairment of goodwill should Carla Vista record in 2021? $960000 $1668000 $0 $708000On September 1, 2020, Flint Corporation acquired Tamarisk Enterprises for a cash payment of $710,000. At the time of purchase, Tamarisk's balance sheet showed assets of $560,000, liabilities of $240,000, and owners' equity of $320,00O. The fair value of Tamarisk's assets is estimated to be $790,000. Compute the amount of goodwill acquired by Flint. Value assigned to goodwill $
- Computing Impairment of Intangible Assets Stiller Company had the following information for its three intangible assets. 1. Patent: A patent was purchased for $180,000 on June 30, 2018. Stiller estimated the useful life of the patent to be 15 years. On December 31, 2020, the estimated future cash flows attributed to the patent were $153,000. The fair value of the patent was $135,000. 2. Trademark: A trademark was purchased for $9,000 on August 31, 2019. The trademark is considered to have an indefinite life. The fair value of the trademark on December 31, 2020, is $4,500. 3. Goodwill: Stiller recorded goodwill in January 2019, related to a purchase of another company. The carrying value of goodwill is $54,000 on December 31, 2020. On December 31, 2020, the segment for which the goodwill relates had a fair value of $1,044,000. The book value of the net assets of the segment (including goodwill) is $1,080,000. Note: Round each of your answers to the nearest whole dollar. a. Classify each…Required information [The following information applies to the questions displayed below.] Assume that Timberline Corporation has 2022 taxable income of $268,000 for purposes of computing the §179 expense. It acquired the following assets in 2022: Asset Furniture (7-year) Computer equipment (5-year) Copier (5-year) Machinery (7-year) Total Purchase Date December 1 February 28 July 15 May 22 Basis $ 422,000 118,000 58,000 452,000 $ 1,050,000 b. What would Timberline's maximum depreciation deduction be for 2022 assuming no bonus depreciation? Note: Round your intermediate calculations and final answer to the nearest whole dollar amount. Maximum Depreciation Deduction (including §179 expense)Intangibles: Balance Sheet Presentation and Income Statement Effects Clinton Company has provided information on Intangible assets as follows: 1. A patent was purchased from Lou Company for $1,230,000 on January 1, 2018. Clinton estimated the remaining useful life of the patent to be 15 years. The patent was carried in Lou's accounting records at a net book value of 5850,000 when Lou sold it to Clinton. 2. During 2019, a franchise was purchased from Rink Company for $550,000, In addition, 6% of revenue from the franchise must be pald to Rink. Revenue from the franchise for 2019 was $2,500,000. Clinton estimates the useful life of the franchise to be 5 years and takes a full vear's amortization in the year of purchase. 3. Clinton incurred RAD costs in 2019 as follows: Materials and equipment $147,000 Personnel 178,000 Indirect costs 69,000 $394,000 Clinton estimates that these costs will be recouped by December 31, 2020. 4. On January 1, 2019, Clinton estimates, based on new events,…
