Question

On July 1, 2020, Riverbed Corporation purchased Young Company by paying $256,900 cash and issuing a $132,000 note payable to Steve Young. At July 1, 2020, the balance sheet of Young Company was as follows.

Cash		$51,400		Accounts payable		$204,000
Accounts receivable		91,500		Stockholders’ equity		241,100
Inventory		105,000				$445,100
Land		40,400
Buildings (net)		75,300
Equipment (net)		69,500
Trademarks		12,000
		$445,100

The recorded amounts all approximate current values except for land (fair value of $62,200), inventory (fair value of $126,400), and trademarks (fair value of $15,600).

(a)

(a)

Correct answer iconYour answer is correct.

Prepare the July 1 entry for Riverbed Corporation to record the purchase. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Account Titles and Explanation	Debit	Credit
enter an account titleenter an account title	enter a debit amountenter a debit amount	enter a credit amountenter a credit amount
enter an account titleenter an account title	enter a debit amountenter a debit amount	enter a credit amountenter a credit amount
enter an account titleenter an account title	enter a debit amountenter a debit amount	enter a credit amountenter a credit amount
enter an account titleenter an account title	enter a debit amountenter a debit amount	enter a credit amountenter a credit amount
enter an account titleenter an account title	enter a debit amountenter a debit amount	enter a credit amountenter a credit amount
enter an account titleenter an account title	enter a debit amountenter a debit amount	enter a credit amountenter a credit amount
enter an account titleenter an account title	enter a debit amountenter a debit amount	enter a credit amountenter a credit amount
enter an account titleenter an account title	enter a debit amountenter a debit amount	enter a credit amountenter a credit amount
enter an account titleenter an account title	enter a debit amountenter a debit amount	enter a credit amountenter a credit amount
enter an account titleenter an account title	enter a debit amountenter a debit amount	enter a credit amountenter a credit amount
enter an account titleenter an account title	enter a debit amountenter a debit amount	enter a credit amountenter a credit amount

eTextbook and Media

List of Accounts

Attempts: 1 of 3 used

(b)

(b)

Prepare the December 31 entry for Riverbed Corporation to record amortization of intangibles. The trademark has an estimated useful life of 4 years with a residual value of $3,320. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Account Titles and Explanation	Debit	Credit
enter an account titleenter an account title	enter a debit amountenter a debit amount	enter a credit amountenter a credit amount
enter an account titleenter an account title	enter a debit amountenter a debit amount	enter a credit amountenter a credit amount

Answer 1

Ans.

Goodwill:-

Goodwill is an intangible asset that is associated with the purchase of one company by another. Its represents the excess amount of consideration transferred over the fair value of the net identifiable assets received.

Ans. 1

Journal entry for Riverbed Corporation to record the purchase.

Date	Accounts Titles and Explanation	Debit ($)	Credit ($)
July, 1	Cash	51,400
	Receivables	91,500
	Inventory	105,000
	Land	40,400
	Buildings	75,300
	Equipment	69,500
	Trademarks	15,600
	Goodwill (W. Note)	144,200
	Accounts Payable		204,000
	Notes Payable		132,000
	Cash		256,900
	(To record the purchase of assets)
Total		592,900	592,900

Working Notes:-

	Amount ($)	Amount ($)
Purchase Consideration:-
Notes Payable	132,000
Cash Payment	256,900	388,900
Less:- Net Assets:-
Cash	51,400
Receivables	91,500
Inventory	105,000
Land	40,400
Buildings	75,300
Equipment	69,500
Trademarks	15,600
Less:-Accounts Payable	(204,000)	(244,700)
Goodwill		144,200

Ans. 2

Journal entry for Riverbed Corporation to record amortization of intangibles.

Date	Accounts Titles and Explanation	Debit ($)	Credit ($)
December, 31	Amortization Expenses	1,535
	Trademarks		1,535
	(To record the amortization expenses)

Working notes:-

	Amount
Fair value of trademarks	$15,600
Less:- Residual value	$3,320
Net value	$12,280
Useful life	4 years
Yearly amortization (12,280 / 4 years)	$3,070
Amortization from July to December (3,070 x 6/12 months)	$1,535