Question

Larkspur Golf Inc. was formed on July 1, 2019, when Matt Magilke purchased the Old Master Golf Company. Old Master provides video golf instruction at kiosks in shopping malls. Magilke plans to integrate the instructional business into his golf equipment and accessory stores. Magilke paid $770,000 cash for Old Master. At the time, Old Master’s balance sheet reported assets of $670,000 and liabilities of $210,000 (thus owners’ equity was $460,000). The fair value of Old Master’s assets is estimated to be $800,000. Included in the assets is the Old Master trade name with a fair value of $12,000 and a copyright on some instructional books with a fair value of $43,200. The trade name has a remaining life of 5 years and can be renewed at nominal cost indefinitely. The copyright has a remaining life of 40 years.

Prepare the journal entry to record amortization expense for 2020. Prepare the intangible assets section of Larkspur Golf Inc. at December 31, 2020.

LARKSPUR GOLF INC. Intangibles Section of Balance Sheet choose the accounting period                                                                      For the Month Ended December 31, 2020December 31, 2020For the Year Ended December 31, 2020
enter a balance sheet item					$enter a dollar amount
enter a balance sheet item					enter a dollar amount
enter a balance sheet item					enter a dollar amount
select a closing section name                                                                      Current AssetsCurrent LiabilitiesExpensesIntangible AssetsLong-term InvestmentsLong-term LiabilitiesNet Income / (Loss)Property, Plant and EquipmentRevenuesStockholders' EquityTotal AssetsTotal Current AssetsTotal Current LiabilitiesTotal ExpensesTotal Intangible AssetsTotal LiabilitiesTotal Liabilities and Stockholders' EquityTotal Long-term InvestmentsTotal Long-term LiabilitiesTotal Property, Plant and EquipmentTotal RevenuesTotal Stockholders' Equity

Answer 1

Basic Calculations

Intangible assets section of Larkspur Golf Inc. at December 31, 2019.

Intangible assets section of Larkspur Golf Inc.

December 31,2019

Particulars	Amount
Trade name	$12000
Copyright*	$42660
Goodwill	$310000
Total intangibles	$364660

*Value of old copyright= Cost of copyright at date of purchase - Amortization of copyright for 2019 = $43200 - ($43200/40 X 1/2years) =$42660

*Value of goodwill= Purchase price - ( Fair value of Assets - Fair value of liabilities) =$ 770000 -($670000-210000)= $310000

Solution

Prepare the journal entry to record amortization expense for 2020.

Date	Account tittle and explanation	Debit	Credit
December 31,2020	Amortization expenses($43200/40 X1 years)	$1080
	Copyright		$1080
	(To record amortization expenses)

Prepare the intangible assets section of Larkspur Golf Inc. at December 31, 2020.

Larkspur Golf Inc.

Intangibles section of Balance Sheet

December 31,2020

Particulars	Amount
Trade name	$12000
Copyright*	$41580
Goodwill	$310000
Total intangibles assets	$363580

*Value of Copyright = Cost of copyright at date of purchase - amortization of copyright for 2019 and 2020= $ 43200 - {($43200 /40 X 1.5 years)= $43200 -$1620=$41580

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