Recording Goodwill upon Acquisition
On January 1, 2020, the balance sheet of Naperville Company (a sole proprietorship) was as follows.
| Assets | Liabilities | |||
| Accounts receivable (net of allowance) | $120,000 | Current | $76,000 | |
| Inventory | 180,000 | Noncurrent | 160,000 | $236,000 |
| Plant and equipment (net of depreciation) | 400,000 | Equity | ||
| Land | 60,000 | Owners’ equity | 524,000 | |
| Total | $760,000 | Total liabilities and owners’ equity | $760,000 |
On January 1, 2020, Chicago Corporation purchased all of the assets and assumed all of the liabilities listed on the above balance sheet for $580,000 cash. The assets, on date of purchase, were valued by Chicago Corporation as follows: accounts receivable (net), $100,000; inventory, $170,000; plant and equipment (net), $400,000; and land, $90,000. In addition, Chicago Corporation estimated purchased intangible assets of $4,000 for customer list and $16,000 for trade names (both previously unrecorded). The liabilities were valued at their carrying amounts.
Required
a. Compute the amount of goodwill included in the purchase price paid by Chicago Corporation.
$Answer
b. Provide the entry that Chicago Corporation should make to record the purchase of Naperville Company.
| Account Name | Dr. | Cr. |
|---|---|---|
| Accounts Receivable (net) | Answer | Answer |
| Inventory | Answer | Answer |
| Plant and Equipment (net) | Answer | Answer |
| Land | Answer | Answer |
| Intangible Asset—Customer List | Answer | Answer |
| Intangible Asset—Trade names | Answer | Answer |
| Goodwill | Answer | Answer |
| Current Liabilities | Answer | Answer |
| Noncurrent Liabilities | Answer | Answer |
| Cash | Answer | Answer |
c. What is the minimum amount of goodwill that Chicago Corporation can amortize at the end of 2020?
In: Accounting
The stockholders’ equity accounts of Flint Company have the following balances on December 31, 2020. Common stock, $10 par, 292,000 shares issued and outstanding $2,920,000 Paid-in capital in excess of par—common stock 1,320,000 Retained earnings 5,080,000 Shares of Flint Company stock are currently selling on the Midwest Stock Exchange at $33. Prepare the appropriate journal entries for each of the following cases. (Credit account titles are automatically indented when amount is entered.
| (a) | A stock dividend of 6% is (1) declared and (2) issued. | |
|---|---|---|
| (b) | A stock dividend of 100% is (1) declared and (2) issued. | |
| (c) | A 2-for-1 stock split is (1) declared and (2) issued. |
In: Accounting
Sheffield Leasing Company agrees to lease equipment to Tamarisk Corporation on January 1, 2020. The following information relates to the lease agreement.
| 1. | The term of the lease is 7 years with no renewal option, and the machinery has an estimated economic life of 9 years. | |
| 2. | The cost of the machinery is $483,000, and the fair value of the asset on January 1, 2020, is $757,000. | |
| 3. | At the end of the lease term, the asset reverts to the lessor and has a guaranteed residual value of $55,000. Tamarisk estimates that the expected residual value at the end of the lease term will be 55,000. Tamarisk amortizes all of its leased equipment on a straight-line basis. | |
| 4. | The lease agreement requires equal annual rental payments, beginning on January 1, 2020. | |
| 5. | The collectibility of the lease payments is probable. | |
| 6. | Sheffield desires a 10% rate of return on its investments. Tamarisk’s incremental borrowing rate is 11%, and the lessor’s implicit rate is unknown. |
(Assume the accounting period ends on December 31.)
Click here to view factor tables.
Discuss the nature of this lease for both the lessee and the
lessor.
This is a _________for Tamarisk.
This is a _________ for Sheffield.
eTextbook and Media
List of Accounts
Calculate the amount of the annual rental payment required. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,972.)
| Annual rental payment |
$ |
eTextbook and Media
List of Accounts
Compute the value of the lease liability to the lessee. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places e.g. 58,972.)
| Present value of minimum lease payments |
$ |
eTextbook and Media
List of Accounts
Prepare the journal entries Tamarisk would make in 2020 and 2021 related to the lease arrangement. (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. Round answers to 0 decimal places e.g. 58,972. Record journal entries in the order presented in the problem.)
|
Date |
Account Titles and Explanation |
Debit |
Credit |
|
1/1/2012/31/201/1/2112/31/21 |
|||
|
(To record the lease.) |
|||
|
(To record lease payment.) |
|||
|
1/1/2012/31/201/1/2112/31/21 |
|||
|
(To record amortization.) |
|||
|
(To record interest.) |
|||
|
1/1/2012/31/201/1/2112/31/21 |
|||
|
1/1/2012/31/201/1/2112/31/21 |
|||
|
(To record amortization.) |
|||
|
(To record interest.) |
In: Accounting
The stockholders’ equity accounts of Bridgeport Company have the
following balances on December 31, 2020.
| Common stock, $10 par, 298,000 shares issued and outstanding | $2,980,000 | |
| Paid-in capital in excess of par—common stock | 1,280,000 | |
| Retained earnings | 5,840,000 |
Shares of Bridgeport Company stock are currently selling on the
Midwest Stock Exchange at $35.
Prepare the appropriate journal entries for each of the following
cases. (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.)
| (a) | A stock dividend of 8% is (1) declared and (2) issued. | |
|---|---|---|
| (b) | A stock dividend of 100% is (1) declared and (2) issued. | |
| (c) | A 2-for-1 stock split is (1) declared and (2) issued. |
|
No. |
Account Titles and Explanation |
Debit |
Credit |
|---|---|---|---|
|
(a) (1) |
enter an account title for case A to record the declaration of stock dividends |
enter a debit amount |
enter a credit amount |
|
enter an account title for case A to record the declaration of stock dividends |
enter a debit amount |
enter a credit amount |
|
|
enter an account title for case A to record the declaration of stock dividends |
enter a debit amount |
enter a credit amount |
|
|
(a) (2) |
enter an account title for case A to record the issuance of stock dividends |
enter a debit amount |
enter a credit amount |
|
enter an account title for case A to record the issuance of stock dividends |
enter a debit amount |
enter a credit amount |
|
|
(b) (1) |
enter an account title for case B to record the declaration of stock dividends |
enter a debit amount |
enter a credit amount |
|
enter an account title for case B to record the declaration of stock dividends |
enter a debit amount |
enter a credit amount |
|
|
(b) (2) |
enter an account title for case B to record the issuance of stock dividends |
enter a debit amount |
enter a credit amount |
|
enter an account title for case B to record the issuance of stock dividends |
enter a debit amount |
enter a credit amount |
|
|
(c) (1) |
enter an account title for case C to record the declaration of the stock split |
enter a debit amount |
enter a credit amount |
|
enter an account title for case C to record the declaration of the stock split |
enter a debit amount |
enter a credit amount |
|
|
(c) (2) |
enter an account title for case C to record the issuance of the stock split |
enter a debit amount |
enter a credit amount |
|
enter an account title for case C to record the issuance of the stock split |
enter a debit amount |
enter a credit amount |
In: Accounting
On January 1, 2020, Sarasota Company purchased 8% bonds having a maturity value of $280,000, for $303,589.66. The bonds provide the bondholders with a 6% yield. They are dated January 1, 2020, and mature January 1, 2025, with interest received on January 1 of each year. Sarasota Company uses the effective-interest method to allocate unamortized discount or premium. The bonds are classified in the held-to-maturity category.
Prepare the journal entry at the date of the bond purchase.
(Enter answers to 2 decimal places, e.g.
2,525.25. 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.)
|
Date |
Account Titles and Explanation |
Debit |
Credit |
|---|---|---|---|
|
Jan. 1, 2020 |
enter an account title to record the transaction on January 1, 2020 |
enter a debit amount |
enter a credit amount |
|
enter an account title to record the transaction on January 1, 2020 |
enter a debit amount |
enter a credit amount |
Prepare a bond amortization schedule. (Round answers
to 2 decimal places, e.g. 2,525.25.)
|
Schedule of Interest Revenue and Bond Premium
Amortization |
|||||||||
|---|---|---|---|---|---|---|---|---|---|
|
|
Cash |
Interest |
Premium |
Carrying Amount |
|||||
|
1/1/20 |
$enter a dollar amount rounded to 2 decimal places |
$enter a dollar amount rounded to 2 decimal places |
$enter a dollar amount rounded to 2 decimal places |
$enter a dollar amount rounded to 2 decimal places |
|||||
|
1/1/21 |
enter a dollar amount rounded to 2 decimal places |
enter a dollar amount rounded to 2 decimal places |
enter a dollar amount rounded to 2 decimal places |
enter a dollar amount rounded to 2 decimal places |
|||||
|
1/1/22 |
enter a dollar amount rounded to 2 decimal places |
enter a dollar amount rounded to 2 decimal places |
enter a dollar amount rounded to 2 decimal places |
enter a dollar amount rounded to 2 decimal places |
|||||
|
1/1/23 |
enter a dollar amount rounded to 2 decimal places |
enter a dollar amount rounded to 2 decimal places |
enter a dollar amount rounded to 2 decimal places |
enter a dollar amount rounded to 2 decimal places |
|||||
|
1/1/24 |
enter a dollar amount rounded to 2 decimal places |
enter a dollar amount rounded to 2 decimal places |
enter a dollar amount rounded to 2 decimal places |
enter a dollar amount rounded to 2 decimal places |
|||||
|
1/1/25 |
enter a dollar amount rounded to 2 decimal places |
enter a dollar amount rounded to 2 decimal places |
enter a dollar amount rounded to 2 decimal places |
enter a dollar amount rounded to 2 decimal places |
|||||
Prepare the journal entry to record the interest revenue and the
amortization at December 31, 2020. (Round answers to 2
decimal places, e.g. 2,525.25. 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.)
|
Date |
Account Titles and Explanation |
Debit |
Credit |
|---|---|---|---|
|
Dec. 31, 2020 |
enter an account title to record the transaction on December 31, 2020 |
enter a debit amount |
enter a credit amount |
|
enter an account title to record the transaction on December 31, 2020 |
enter a debit amount |
enter a credit amount |
|
|
enter an account title to record the transaction on December 31, 2020 |
enter a debit amount |
enter a credit amount |
Prepare the journal entry to record the interest revenue and the
amortization at December 31, 2021. (Round answers to 2
decimal places, e.g. 2,525.25. 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.)
|
Date |
Account Titles and Explanation |
Debit |
Credit |
|---|---|---|---|
|
Dec. 31, 2021 |
enter an account title to record the transaction on December 31, 2021 |
enter a debit amount |
enter a credit amount |
|
enter an account title to record the transaction on December 31, 2021 |
enter a debit amount |
enter a credit amount |
|
|
enter an account title to record the transaction on December 31, 2021 |
enter a debit amount |
enter a credit amount |
In: Accounting
On January 1, 2020, Sheffield Company purchased 11% bonds,
having a maturity value of $289,000 for $311,481.74. The bonds
provide the bondholders with a 9% yield. They are dated January 1,
2020, and mature January 1, 2025, with interest received on January
1 of each year. Sheffield Company uses the effective-interest
method to allocate unamortized discount or premium. The bonds are
classified as available-for-sale category. The fair value of the
bonds at December 31 of each year-end is as follows.
|
2020 |
$309,400 |
2023 |
$299,100 | |||
|---|---|---|---|---|---|---|
|
2021 |
$297,900 |
2024 |
$289,000 | |||
|
2022 |
$296,900 |
| (a) | Prepare the journal entry at the date of the bond purchase. | |
|---|---|---|
| (b) | Prepare the journal entries to record the interest revenue and recognition of fair value for 2020. | |
| (c) | Prepare the journal entry to record the recognition of fair value for 2021. |
|
No. |
Date |
Account Titles and Explanation |
Debit |
Credit |
|---|---|---|---|---|
|
(a) |
choose a transaction date
Jan. 1, 2020Dec. 31, 2020Dec. 31, 2021 |
enter an account title to record transaction A | enter a debit amount | enter a credit amount |
| enter an account title to record transaction A | enter a debit amount | enter a credit amount | ||
|
(b) |
choose a transaction date
Jan. 1, 2020Dec. 31, 2020Dec. 31, 2021 |
enter an account title to record interest received | enter a debit amount | enter a credit amount |
| enter an account title to record interest received | enter a debit amount | enter a credit amount | ||
| enter an account title to record interest received | enter a debit amount | enter a credit amount | ||
|
(To record interest received) |
||||
| enter an account title to record fair value adjustment | enter a debit amount | enter a credit amount | ||
| enter an account title to record fair value adjustment | enter a debit amount | enter a credit amount | ||
|
(To record fair value adjustment) |
||||
|
(c) |
choose a transaction date
Jan. 1, 2020Dec. 31, 2020Dec. 31, 2021 |
enter an account title to record transaction C | enter a debit amount | enter a credit amount |
| enter an account title to record transaction C | enter a debit amount | enter a credit amount |
In: Accounting
|
Sunnry Day Manufacturing Company has just started operation on September 1, 2020. The following are the transactions for the month of September.
|
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|
2. Prepare summary of accounts. |
| 3. Prepare the cost of each job. |
In: Accounting
Q4. You are 20 years old and have completed your BBA and want to pursue further education but you don’t want to take money from your father. Your plan is to start working and earn enough money so that you can finance your degree on your own and get yourself enrolled in five years’ time. You estimate that the annual cost of doing an MBA 5 years from today will be PKR 400,000 and the program will be two years long. You will need the money at the beginning your program so that you are not worried about how to clear your dues during your studies. Luckily you go for a job interview and they hire you and you start working at a salary of PKR 25,000. So you decide that 50% you will deposit in a saving account at a 10% rate with monthly compounding for your further studies and the remaining amount you will use for your daily expenses.
Salary is monthly and MBA cost is for one year as annual cost means one year cost
In: Finance
If you were a hospital CEO being asked to redirect IT resources for this project, what would you want in return from the agency to ensure that this system provided value to your organization and clinicians?
In: Nursing
What would you recommend to the CEO and Board as to how to more fully apply a population health model and positively impact the health of the community and control costs at the same time (The Triple Aim)?
In: Nursing