Problem: East Inc. acquired all of the shares of West Company for $1,000,000 cash on January 1, 2020. No liabilities were assumed. The following assets were acquired, at fair value:
Land $500,000
Building $200,000
Patents $200,000
The building will be depreciated using the straight-line method. It has an estimated useful life of 20 years and no residual value.
The patents have an estimated useful life of 25 years and no residual value. They are amortized on the straight-line basis. All rights to the patents were sold on January 1, 2022, for $300,000.
The company's fiscal year-end is December 31.
Required:
a. Calculate the goodwill purchased.
b. Calculate the depreciation and amortization expenses for 2020.
c. Calculate the gain or loss on the sale of the patents. Assume amortization expense is claimed on the patents for 2021.
d. Calculate the total carrying amount of the acquired assets reported on the statement of financial position at December 31, 2022 after depreciation and amortization expenses have been deducted.