Accounting for intangibles
Midland Telecom provides communication services in Iowa, Nebraska, the Dakotas, and Montana. Midland purchased goodwill as part of the acquisition of Shipley Wireless Company, which had the following figures:
Book value of assets $ 750,000
Market value of assets 1,000,000
Market value of liabilities 530,000
Requirements
1. Journalize the entry to record Midland's purchase of Shipley Wireless for $320,000 cash plus a $480,000 note payable.
2. What special asset does Midland Telecom account for this asset after acquiring Shipley wireless? Explain in details.
Requirement 1
Purchase price to acquire Shipley Wireless
Market value of Shipley Wireless's assets
Less: Shipley Wireless's liabilities
Market value of Shipley Wireless's net assets
Goodwill
Requirement 2
What special asset does Midland's acquisition of Shipley Wireless identify? How should Midland Telecom account for this asset after acquiring Shipley Wireless?
Explain in detail.