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

A property is available for sale that could normally be

A property is available for sale that could normally be financed with a fully amortizing $80,000 loan at a 10 percent rate with monthly payments over a 25-year term. Payments would be $726.96 per month. The builder is of ...

1 what are the general requirements regarding income

1. What are the general requirements regarding income, investments, and dividends with which a REIT must comply to maintain its tax-exempt status? 2. What are the three principal types of REITs? 3. What is a mortgage REI ...

Get rich quick a funds management company is considering an

Get Rich Quick, a funds management company, is considering an investment in a new pharmaceutical company. The company will be unable to pay a dividend until the end of Year 6. If a new product is successfully developed f ...

1 why is notional principal often exchanged in a currency

1. Why is notional principal often exchanged in a currency swap but not in an interest rate or equity swap? Why would the parties to a currency swap choose not to exchange the notional principal? 2 .Explain how the follo ...

Ethical dilemma mike a recent college graduate opened a

Ethical Dilemma. Mike, a recent college graduate, opened a checking account with a local bank. He asked numerous questions before deciding on this bank, including inquiring about checking account fees and annual credit c ...

A common stock currently has a beta of 17 the risk-free

A common stock currently has a beta of 1.7, the risk-free rate is 7 percent annually, andthe market return is 12 percent annually. The stock is expected to generate a constant dividend of $6.70 per share. A pending lawsu ...

1 what is behavioral research what are its fundamental

1. What is behavioral research? What are its fundamental goals and limitations? Why is learning about behavioral research important? 2. In what ways is behavioral research similar to and different from research in the na ...

You purchased a new car for 23000 to purchase the car you

You purchased a new car for $23,000. To purchase the car you have a loan with payments of $509.09 monthly for four years. What is the monthly interest rate on this loan? What is the nominal annual interest rate on this l ...

Each of the following studies examines the relationship

Each of the following studies examines the relationship between the quality of breakfast and academic performance for third-grade children. Identify which is correlational, which is experimental, and which is nonexperime ...

1 define the followinga a conditional sales contractb a

1. Define the following: a. A conditional sales contract b. A chattel mortgage 2. Under what conditions would a firm prefer the following: a. A "fixed-rate" term loan from a bank b. A "floating-rate" term loan, with the ...

  • 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