136B_w09_mt1

136B_w09_mt1 - 26. JOURNAL ENTRIES: For each item below,...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
26. JOURNAL ENTRIES: For each item below, record the appropriate journal entry: A. Sell goods on credit for $100,000 excluding sales taxes, and also cash sales where you collected $54,500 including sales taxes. The sales tax rate is 9%. B. Pay $200,000 to an outside consultant for expert scientific analysis in connection with the research and development of a vaccine. C. Purchase an expensive $250,000 piece of equipment for use in the lab in connection with ongoing research and development. D. Relative to the equipment in (C) above, if the equipment is to be used for 10 years and will have no salvage value, what (if any) journal entry is required at the end of the first year? E. A lawsuit has been filed against the company which seeks to recover $500,000 in damages. The attorneys indicate that although the amount of the loss could reach the $500,000 mark, the likelihood is remote. F. Same as C above, except the attorneys indicate that a loss is probable and they estimate the loss could be anywhere between $50,000 and $200,000. G. Same as C above, except the attorneys indicate that a loss is probable for an estimated $25,000. H. We are suing a competitor for infringement upon our patented technology. Our attorneys indicate that it is probable that we will recover $1,000,000 from the lawsuit. I. Once we have completed our research and development, we pay an attorney $200,000 to secure a patent on the resulting process which we plan to begin immediate production.
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
27. Acquiror, Inc. purchased Bought, Inc. for: 2,500,000 $ Cost Fair Value Cash 25,000 25,000 Prepaid expenses 40,000 40,000 Fixed assets, net 1,000,000 1,250,000 Intangible- customer lists - 1,500,000 Accounts payable 400,000 400,000 Debt 600,000 600,000 II. Present the journal entry to record the purchase by Acquiror, Inc. III. Indicate the proper means of amortizing the goodwill under GAAP. As a result of the acquisition, Acquiror obtained all of the assets and assumed all of the liabilities of Bought, Inc. The following represents the balance sheet of Bought, Inc., at cost and fair value, on the date of the acquisition: I. Compute any goodwill resulting from the transaction. 28. Estimated value of the reporting unit is 5,000,000 $ The net book value of the reporting unit is: 5,200,000 $ Goodwill on the books of the reporting unit 1,000,000 $ Ignoring goodwill, the fair market value of the reporting units net assets exceeds cost by $200,000. III. If you believe there is an impairment, record that impairment in a journal entry. IV. How would your answer to each of the above questions differ if the estimated fair value of the reporting unit were $5,500,000 instead of $5,000,000? I. Based upon the information above, is there any impairment of goodwill? Briefly support this assertion. Acquiror, Inc. purchased Bought, Inc. in a prior year and they track Bought as a separate
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 01/31/2010 for the course ECON 136B taught by Professor Anderson during the Spring '08 term at UCSB.

Page1 / 18

136B_w09_mt1 - 26. JOURNAL ENTRIES: For each item below,...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online