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(solution) Please assist with the following questions. Thank you


Please assist with the following questions. Thank you


ACCT 310: Intermediate Accounting I

 

Homework Assignment #7 Question 1

 

The Montgomery Company provided the following information on intangible assets:

 

(a) A patent was purchased for $1 million on June 30, 2011. Montgomery estimated the remaining useful

 

life of the patent to be five years.

 

(b) During 2013, a franchise was purchased from the Taco Time Company for $40,000. The contractual life

 

of the franchise is 20 years and Montgomery records a full year of amortization in the year of purchase.

 

(c) Effective January 1, 2013, based on new events that have occurred, Montgomery estimates that the

 

remaining life of the patent is seven more years.

 

Prepare the entries required to reflect the above information for 2011 through 2013, including year-end

 

adjusting entries to record amortization.

 

Question 2

 

The Jonas Corporation purchased all of the outstanding common stock of Bieber Corporation for $25 million in

 

cash. The book value of Bieber?s net assets (assets minus liabilities) was $16.25 million. The fair values of all of

 

Bieber?s assets and liabilities were equal to their book values with the following exceptions:

 

Receivables

 

P,P,&E

 

Intangible Assets Book Value

 

$3,000,000

 

$10,200,000

 

$30,000 Fair Value

 

$2,850,000

 

$11,200,000

 

$3,000,000 Calculate the amount paid for Goodwill.

 

Question 3

 

On October 15, 2015, the Brown Company exchanged operational assets with the Yellow Company. The facts

 

of the exchange are as follows:

 

Original Cost

 

Accumulated Depreciation

 

Fair Market Value Brown Company

 

$300,000

 

$200,000

 

$125,000 Yellow Company

 

$278,000

 

$220,000

 

$110,000 To equalize the exchange, Yellow Company paid Brown Company $15,000 in cash.

 

Record the exchange transaction on Brown Company?s books. Question 4

 

Presented below is information related to equipment owned by Carpenter Company at December 31, 2014.

 

Cost

 

$9,000,000

 

Accumulated Depreciation to date

 

$1,000,000

 

Expected future net cash flows

 

$7,000,000

 

Fair Value

 

$4,400,000

 

Assume Carpenter Company will continue to use this asset in the future. As of December 31, 2014, the

 

equipment has a remaining useful life of 4 years.

 

(1) Prepare the journal entry (if any) to record the impairment of the asset at December 31, 2014. (2) Prepare the journal entry (if any) to record depreciation expense for 2015.

 

(3) The fair value of the equipment at December 31, 2015 is $5,100,000. Prepare the journal entry (if any)

 

necessary to record the increase in fair value. Question 5

 

Assume the same facts as Question 5 above except that Carpenter Company intends to dispose of the

 

equipment in the coming year and that the cost of disposal is $20,000.

 

(1) Prepare the journal entry (if any) to record the impairment of the asset at December 31, 2014.

 

(2) Prepare the journal entry (if any) to record depreciation expense for 2015.

 

(3) The asset was not sold by December 31, 2015. The fair value of the equipment at December 31, 2015

 

is $5,100,000. Prepare the journal entry (if any) necessary to record the increase in fair value assuming

 

the cost of disposal is still $20,000.

 


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