Question

2. On December 31,2015 the Waddell Corporation acquired a custom-made plant asset by issuing a promissory note with a face value of $800,000, a due date of December 31,2022, and a stated coupon rate of interest 4%.

More Information: Interest is compounded annually and is payable at the end on each year. The fair value of the customized asset is not readily determinable and the note receivable is not publicly traded. Given the​ company's incremental borrowing rate and current market​ conditions, the imputed rate of interest for the note is estimated as 9%.

Record the journal entry for the purchase of the plant asset.

I have this so far.

Account
Plant Asset	?
Discount on Notes Payable	?
Notes Payable		800,000

6. Einhorn Devices acquires Howard, a small start-up company, by paying $2,170,600 in cash on January 2. Below are teh book values and fair values of Howard on the date of acquisition.

Howard	Book Value	Fair Value
Cash	$31,000	31,000
Receivables	100,700	100,300
Manufacturing Equipment	640,400	654,600
Patents (remaining life 8 years)	60,900	676,800
Trademarks	14,650	187,750
Payables	58,806	58,806

a. What is amount of goodwill required?

b. what intangible assets are required? which of the intanibles have an indefinite life? Which will be amoritized? What will the amortization expense in the year after acquisition?

Answer 1

Requirement 2
	Year	Cashflow	Discount factor@9%	Present value
	0		1
	1	32000	0.917431193	29357.79817
	2	32000	0.841679993	26933.75978
	3	32000	0.77218348	24709.87136
	4	32000	0.708425211	22669.60675
	5	32000	0.649931386	20797.80436
	6	32000	0.596267327	19080.55446
	7	32000	0.547034245	17505.09583
	7	800000	0.547034245	437627.3959
	Value of Plant asset			598681.8866
	Date	General Journal		Debit	Credit
				Amount in $
	December 31, 2015	Plant Asset		598681.89		As calculated above
			Discount on Note Payabe		201318.11	Difference
			Notes Payable		800000	Given in the question
		To record the Notes payable against purchase of plant asset
Requirement 3	Howard	Book value	Fair value	Difference
	Cash	31000	31000	0
	Receivables	100700	100300	-400	will be reduced from goodwill
	Manufacturing Equipment	640400	654600	14200	Depreciated
	Patents(remaining life 8 years)	60900	676800	615900	Amortized
	Trademarks	14650	187750	173100	Indefinate life
	Payables	58806	58806	0
	Total		1709256
	Acquisition price		2170600
	Difference between fair value and acquisition price		461344
Requirement 3a)	The amount of goodwill		1709256
Requirement 3b)	Intangibles with indefinate life    =		Trademakrs & Goodwill
	Intangibles which will be amortized =		Patents
	The amortization expense year after the acqusition will be =		84600	=676800/8 Years