Prepare a schedule showing the intangibles section of Harriss balance sheet at

Prepare a schedule showing the intangibles section of

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Prepare a schedule showing the intangibles section of Harris's balance sheet at December31, 2010. Show supporting computations in good form.(b) Prepare a schedule showing the income statemet effect for the year ended December 31, 2010,as a result of the facts above. Show supporting computations in good form. Devon Harris Company INTANGIBLES SECTION OF BALANCE SHEET 31-Dec-10 Patents from Bradtke Company, net of accumulated amortization $1,800,000 of $700,000 (Schedule 1) Franchise from Greene Company, net of accumulated amortization of $58,000 (Schedule 2) 522,000 Total intangibles $2,322,000 Cost of patent at date of purchase $2,500,000 Amortization of patent for 2009 ($25000,000/10 years) 250,000 2,250,000 Amortization of patent for 2010 ($2,250,000/5 years) ($450,000) Patent balance $1,800,000 Schedule 1 Computation of Patent from Bradtke Company Schedule 2 Computation of Franchise from Greene Company
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Cost of franchise at date of purchase $580,000 Amortization of franchise for 2010 ($580,000/ 10) 58,000 Franchise balance $522,000 (b) Devon Harris Compay Income Statement Effect For the Year ended December 31, 2010 Patent from Bradtke Company Amortization of patent for 2010 ($2,250,000/ 5 years) $450,000 Franchise from Greene Company: Amortization of franchise for 2010 ($580,000/10 years) $58,000 Payment to GreeneCompay ($2,500,000 * 5%) 125,000 183,000 Research and Development costs 433,000 Total charged against income $1,066,000
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Exercise 12-12 (Accounting for Goodwill)Fred Graf, owner of Graf Interiors, is negotiating for the purchase of Terrell Galleries. The balance sheet of Terrell is given an abbreviatedform below.TERRELL GALLERIESBalance SheetAs of December 31, 2010AssetsLiabilities and Stockholders' EquityCash$100,000 Accounts payable$50,000 Land70,000Long-term notes payable300,000Building (net)200,000Total liabilities$350,000 Equipment (net)175,000Common Stock$200,000 Copyright30,000Retained Earnings25,000$225,000 Total assets$575,000 Total liabilities and stockholders equity$575,000 Graf and Terrelll agree that:1. Land is undervalued by $50,0002. Equipment is overvalued by $5,000.Terrelll agree to sell the gallery to Graf for $380,000.Instructions:Prepare the entry to record the purchase of Terrell Galleries on Graf's books.
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Note: To find Goodwill, we have to compare the fair value of net assets to the selling price. Net assets are NOT the same as Total assets. To find Net Assets, take Total Assets - Total Liabilities. This is the same as our EQUITY. Net assets of Terrell as reported $225,000 Adjustments to fair value: Increase in land value $50,000 Decrease in equipment value -5,000 $45,000 Fair value of Zweifel net assets $270,000 Selling price 380,000 Goodwill $110,000 (Selling price - fair value of net assets) The journal entry to record this transaction is as follows: Cash $100,000 Land $120,000 Building $200,000 Equipment 170,000 Copyright 30,000 Goodwill 110,000 Accounts Payable 50,000 Long-term Notes Payble 300,000 Cash 380,000
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