Question

On July 1, 2017, Blue Corporation purchased CraneCompany by paying $ 187,000 cash and issuing a...

On July 1, 2017, Blue Corporation purchased CraneCompany by paying $ 187,000 cash and issuing a $140,250 note payable to Jay Crane. At July 1, 2017, the balance sheet of Crane Company was as follows.

Cash

$ 27,500

Accounts payable

$ 217,500

Accounts receivable

92,300

Stockholders’ equity

222,400

Inventory

125,100

$ 439,900

Land

31,100

Buildings (net)

70,100

Equipment (net)

73,700

Trademarks

20,100

$ 439,900


The recorded amounts all approximate current values except for land (fair value of $ 59,100), inventory (fair value of $ 130,700), and trademarks (fair value of $28,290).

A)Prepare the July 1 entry for Blue Corporation to record the purchase.

B)Prepare the December 31 entry for BlueCorporation to record amortization of intangibles. The trademark has an estimated useful life of 8years with a residual value of $ 1,090.

Homework Answers

Answer #1

Solution:

Blue Corporation
Journal Entry
Date Particulars Debit Credit
1-Jul-17 Cash Dr $27,500.00
Accounts Receivable Dr $92,300.00
inventory Dr $130,700.00
Land Dr $59,100.00
Building Dr $70,100.00
Equipment Dr $73,700.00
Trademarks Dr $28,290.00
Goodwill Dr $63,060.00
         To Accounts Payable $217,500.00
         To Cash $187,000.00
         To Note Payable $140,250.00
(To record the purchase)
31-Dec-17 Amortization Expense Dr
[($28290 - $1090) *1/8 *6/12]
$1,700.00
        To Trademarks $1,700.00
(To record Amortization of Trademarks)
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