Question

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.

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)