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1. Lower-of-cost-or-market. The December 31, 2017 inventory of Gwynn Company consisted of four products, for which...

1. Lower-of-cost-or-market. The December 31, 2017 inventory of Gwynn Company consisted of four products, for which certain information is provided below.

Original Replacement Estimated Expected Normal Profit

Product Cost Cost Disposal Cost Selling Price on Sales

A $24.00 $22.00 $6.50 $40.00 20%

B $ 42.00 $40.00 $10.00 $48.00 25%

C $120.00 $115.00 $25.00 $190.00 30%

D $19.00 $15.80 $4.00 $26.00 10%

Instructions Using the lower-of-cost-or-market approach applied on an individual-item basis, compute the inventory valuation that should be reported for each product on December 31, 2017. Show your work/calculations.

2. Nonmonetary exchange.

A machine cost $300,000, has annual depreciation expense of $60,000, and has accumulated depreciation of $150,000 on December 31, 2017. On April 1, 2018, when the machine has a fair value of $120,000, it is exchanged for a similar machine with a fair value of $360,000 and the proper amount of cash is paid. The exchange lacked commercial substance.

Instructions Prepare all entries that are necessary at April 1, 2018. Show your work/calculations.

3. On July 1, 2017, Vinson Corporation acquired Carley Company for $900,000 cash. At the time of purchase, Carley's balance sheet showed assets of $775,000 and liabilities of $250,000. The fair value of Carley's assets is estimated to be $950,000.

Instructions

(a) Compute the amount of goodwill acquired by Vinson. Show your work/calculations.

(b) On December 31, the fair value of Carley is estimated to be $720,000 and the implied fair value of goodwill is $170,000. The carrying value of Carley's net assets, including the goodwill, at year-end is $750,000. Prepare Vinson's journal entry, if necessary, to record impairment of goodwill. Show your work/calculations.

Expert Solution

ekkarill92 answered 2 years ago

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