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.
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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