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Chapter 10 Solution

# Chapter 10 Solution - Exercise 10-6 Calculation of goodwill...

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Exercise 10-6 Calculation of goodwill: EUR Purchase price 17,500,000 Less fair value of net assets: Assets 23,000,000 Less: Liabilities assumed (9,500,000 ) (13,500,000 ) Goodwill 4,000,000 1

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Exercise 10-9 To record the acquisition of land in exchange for common stock. February 1, 2006 Land ........................................................................... 95,000 ................................................ Common stock (5,000 shares x 19) .................................................................................... 95,000 To record the acquisition of a building through purchase and donation. November 2, 2006 Building ..................................................................... 650,000 ........................................................................... Cash ....................................................................... 400,000 .................... Revenue - donation of asset (difference) ....................................................................... 250,000 2
Exercise 10-10 Requirement 1 Tractor (6,000 cash + 18,783 present value of note) . 24,783 Discount on note payable (difference) ...................... 6,217 ............................................................................ Cash ........................................................................... 6,000 ....................................... Note payable (face amount) ......................................................................... 25,000 †  Present value of note payment: PV = 25,000 (.75131) = 18,783 Present value of 1: n = 3, i = 10% (from Table 2) Requirement 2 EUR 2006: Interest expense ( 18,783 x 10%) = 1,878 2007: Interest expense [( 18,783 + 1,878 ) x 10%] = 2,066 Requirement 3 2006: 25,000 – ( 6,217 – 1,878) = 20,661 2007: 25,000 – ( 6,217 – 1,878 – 2,066) = 22,727 3

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Exercise 10-17 1. To record the purchase of equipment on account. Equipment ( 30,000 x 98%) ....................................... 29,400 ....................................................... Accounts payable ......................................................................... 29,400 2. To record the acquisition of equipment in exchange for a note. Equipment (determined below) .................................. 29,091 Discount on note payable (difference) ....................... 2,909 ....................................... Note payable (face amount) ......................................................................... 32,000 PV = 32,000 (.90909) = 29,091 Present value of 1: n =1, i =10% (from Table 2) 3. To record the exchange of old equipment for new equipment. Equipment - new ( 2,500 + 24,000) ........................... 26,500 Loss ( 6,000 - 2,500) .................................................. 3,500 Accumulated depreciation ......................................... 8,000 ............................................................................ Cash ......................................................................... 24,000 .......................................................... Equipment - old ......................................................................... 14,000 4. To record the acquisition of equipment by the issuance of stock. Equipment .................................................................. 26,000 4
............................................................ Common stock ......................................................................... 26,000 5

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Exercise 10-21 To expense R&D costs incorrectly capitalized. Research and development expense (below) .............. 3,280,000 .......................................................................... Patent .................................................................... 3,280,000 Research and development expenditures: CAD Basic research to develop the technology 2,100,000 Engineering design work 680,000 Development of a prototype 300,000 Testing and modification of the prototype 200,000 Total 3,280,000 To capitalize cost of equipment incorrectly capitalized as patent. Equipment .................................................................. 60,000 .......................................................................... Patent ......................................................................... 60,000 To record depreciation on equipment used in R&D projects. Research and development expense ........................... 12,000 ...................... Accumulated depreciation - equipment ......................................................................... 12,000 6
Exercise 10-25 Requirement 1 (KRW in millions) Research and development expense ........................... 4 Software development costs ....................................... 2 ............................................................................ Cash .................................................................................. 6 Requirement 2

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