Question - Intangibles
Freitas Corporation was organized early in 2016. The following expenditures were made during the first few months of the year:
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Attorney's fees in connection with the organization of the corporation
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$12,000
|
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State filing fees other incorporation costs
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3,000
|
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Purchase of a patent
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20,000
|
|
Legal and other fees for transfer of the patent
|
2,000
|
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Purchase of furniture
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30,000
|
|
Pre-opening salaries
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40,000
|
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Total
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$107,000
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Required: Prepare a summary journal entry to record the $107,000 in cash expenditures.
Question - Goodwill
On March 31, 2016, Wolfson Corporation acquired all of the outstanding common stock of Barney Corporation for $17,000,000 in cash. The book values and fair values of Barney's assets and liabilities were as follows:
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Book Value
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Fair Value
|
|
Current assets
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$6,000,000
|
$7,500,000
|
|
Property, plant and equipment
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11,000,000
|
14,000,000
|
|
Other assets
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1,000,000
|
1,500,000
|
|
Current liabilities
|
4,000,000
|
4,000,000
|
|
Long-term liabilities
|
6,000,000
|
5,500,000
|
Required: Calculate the amount paid for goodwill.
Question - Goodwill
Johnson Corporation acquired all of the outstanding common stock of Smith Corporation for $11,000,000 in cash. The book value of Smith's net assets (assets minus liabilities) was $7,800,000. The fair values of all of Smith's assets and liabilities were equal to their book values with the following exceptions:
|
|
Book Value
|
Fair Value
|
|
Receivables
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$1,300,000
|
$1,100,000
|
|
Property, plant and equipment
|
8,000,000
|
9,400,000
|
|
Intangible assets
|
200,000
|
1,200,000
|
Required: Calculate the amount paid for goodwill.
Question - Interest capitalization
On January 1, 2016, the Highlands Company began construction on a new manufacturing facility for its own use. The building was completed in 2017. The company borrowed $1,500,000 at 8% on January 1 to help finance the construction. In addition to the construction loan, Highlands had the following debt outstanding throughout 2016:
$5,000,000, 12% bonds
$3,000,000, 8% long-term note
Construction expenditures incurred during 2016 were as follows:
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January 1
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$600,000
|
|
March 31
|
1,200,000
|
|
June 30
|
800,000
|
|
September 30
|
600,000
|
|
December 31
|
400,000
|
Required: Calculate the amount of interest capitalized in 2016 for the building using the specific interest method.