Chapter 12 Homework Solutions.doc - EXERCISE 12-12(a Cash...

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EXERCISE 12-12 (a) Cash ................................................................................... 50,000 Receivables ....................................................................... 90,000 Inventory ............................................................................ 125,000 Land ................................................................................... 60,000 Buildings ........................................................................... 75,000 Equipment ......................................................................... 70,000 Trademark .......................................................................... 15,000 Goodwill ............................................................................. 65,000* Accounts Payable .................................................... 200,000 Notes Payable .......................................................... 100,000 Cash .......................................................................... 250,000 *$350,000 – [$235,000 + $20,000 + $25,000 + $5,000] Note that the building and equipment would be recorded at the 7/1/17 cost to Brigham; accumulated depreciation accounts would not be recorded. (b) Amortization Expense ...................................................... 1,500 Trademarks ([$15,000 – $3,000] X 1/4 X 6/12) ........... 1,500 EXERCISE 12-13 (a) December 31, 2017 Loss on Impairment .......................................... 1,100,000* Copyrights ................................................ 1,100,000 *Carrying amount $4,300,000 Fair value 3,200,000 Loss on impairment $1,100,000 Note: Asset fails recoverability test because the expected net cash flows of $4,000,000 are less than the carrying value of $4,300,000. (b) Amortization Expense ....................................... 320,000* Copyrights ................................................ 320,000
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*New carrying amount $3,200,000 Useful life ÷ 10 years Amortization per year $ 320,000 (c) No entry is necessary. Restoration of any impairment loss is not permitted for assets held for use. EXERCISE 12-14 (a) December 31, 2017 Loss on Impairment ............................... 15,000,000 Goodwill ......................................... 15,000,000 The fair value of the reporting unit ($335 million) is below its carrying value ($350 million). Therefore, an impairment has occurred. To determine the impair-ment amount, we first find the implied goodwill.
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