Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Basic Finance Expert

The Horstmeyer Corporation commenced operations early in 2011. A number of expenditures were made during 2011 that were debited to one account called intangible asset. A recap of the $644,000 balance in this account at the end of 2011 is as follows:

Date Transaction Amount
2/3/11 State incorporation fees and legal costs related to organizing the corporation $ 7,000
3/1/11 Fire insurance premium for three-year period 6,000
3/15/11 Purchased a copyright 20,000
4/30/11 Research and development costs 40,000
6/15/11 Legal fees for filing a patent on a new product resulting from an R&Dv project 3,000
9/30/11 Legal fee for successful defense of patent developed above 12,000
10/13/11 Entered into a 1O-year franchise agreement with franchisor 40,000
Various Advertising costs 16,000
11/30/11 Purchase of all of the outstanding common stock of Stiltz Corp. 500,000
Total $644,000
16,000
500,000
$644,000

The total purchase price of the Stiltz Corp. stock was debited to this account. The fair values of Stiltz Corp.'s
assets and liabilities on the date of the purchase were as follows:

Receivables $100,000
Equipment 350,000
Patent 150,000
TotaI assets 600,000
Note payable assumed (220,000)
Fair value of net assets $ 380,000

Required:
Prepare the necessary journal entries to clear the intangible asset account and to set up accounts for separate
intangible assets, other types of assets, and expenses indicated by the transactions. Company, plaintiff, paid $12,000 in legal fees in November, in connection with a successful infringement suit

Case A. Kapono Farms exchanged an old tractor for a newer model. The old tractor had a book value of $12,000
(original cost of $28,000 less accumulated depreciation of $16,000) and a fair value of $9,000. Kapono paid
$20,000 cash to complete the exchange. The exchange has commercial substance.
Required:
1. What is the amount of gain or loss that Kapono would recognize on the exchange? What is the initial valur
the new tractor?
2. Repeat requirement 1 assuming that the fair value of the old tractor is $14,000 instead of $9,000.

Case B. Kapono Farms exchanged 100 acres of farmland for similar land. The farmland given had a book value
of $500,000 and a fair value of $700,000. Kapono paid $50,000 cash to complete the exchange. The exchange
has commercial substance.

Required:
1. What is the amount of gain or loss that Kapono would recognize on the exchange? What is the initial value of
the new land?
2. Repeat requirement 1 assuming that the fair value of the farmland given is $400,000 instead of $700,000.
3. Repeat requirement 1 assuming that the exchange lacked commercial substance.

 

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M928501

Have any Question? 


Related Questions in Basic Finance

Duff beer is considering loosening its credit standards and

Duff Beer is considering loosening its credit standards and lengthening the terms from net 30 days to net 45. Doing so will result in higher sales but also more defaults and extra administrative costs. Assuming variable ...

1 distinguish between the four types of relational

1. Distinguish between the four types of relational collaborative arrangements. Provide an example of each. 2. What do you believe will be the impact of the Internet on market distribution by 2010? 3. What is a shipper r ...

1 deriving from the conclusion of proposition i what is the

1. Deriving from the conclusion of Proposition I, what is the crux of M&M Proposition II? What is the natural relationship between the required returns on debt and on equity that results from Proposition II? 2. In what w ...

1 in terms of ipo investing what does it mean to flip a

1. In terms of IPO investing, what does it mean to "flip" a stock? According to the empirical results regarding short- and long-term returns that follow equity offerings, is flipping a wise investment strategy? 2. What m ...

Suppose we would like to determine if the typical amount

Suppose we would like to determine if the typical amount spent per customer for dinner at a new restaurant in town is more than $20.00. A sample of 49 customers over a three-week period was randomly selected and the aver ...

1 an interest rate swap has two primary risks associated

1. An interest rate swap has two primary risks associated with it. Identify and explain each risk. 2. Define and explain a constant maturity swap. 3. Explain how an interest rate swap is a special case of a currency swap ...

Determine whether each of the following hypotheses is

Determine whether each of the following hypotheses is testable and refutable; if not, explain why. a. The color red as seen by males is different from the color red as seen by females. b. A list of three-syllable words i ...

Discounted payback timeline manufacturing co management is

Discounted payback: Timeline Manufacturing Co. management is evaluating two projects. The company uses payback criteria of three years or less. Project A has a cost of $1,912,855, and project B's cost is $1,875,000. Cash ...

Suppose that you are following the stock of a firm that has

Suppose that you are following the stock of a firm that has been experiencing severe problems. Failure is imminent unless the firm is granted government guaranteed loans. If the firm fails, its stock will, of course, fal ...

A company tests all new brands of golf balls to ensure that

A company tests all new brands of golf balls to ensure that they meet certain specifications. One test conducted is intended to measure the average distance traveled when the ball is hit by a machine. Suppose the company ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro

Describe what you learned about the impact of economic

Describe what you learned about the impact of economic, social, and demographic trends affecting the US labor environmen