Question 1 - On September 1, 2012, Winans Corporation acquired Aumont Enterprises for a cash payment of $708,440. At the time of purchase, Aumont's balance sheet showed assets of $610,930, liabilities of $199,390, and owners' equity of $411,540. The fair value of Aumont's assets is estimated to be $829,590.
Compute the amount of goodwill acquired by Winans.
Question 2 - Kenoly Corporation owns a patent that has a carrying amount of $307,180. Kenoly expects future net cash flows from this patent to total $217,780. The fair value of the patent is $116,450.
Prepare Kenoly's journal entry, if necessary, to record the loss on impairment.
Question 3 - Capriati Corporation commenced operations in early 2012. The corporation incurred $66,890 of costs such as fees to underwriters, legal fees, state fees, and promotional expenditures during its formation.
Prepare journal entries 1) to record the $66,890 expenditure and 2) 2012 amortization, if any.
Question 4 - Powerglide Company, organized in 2011, has set up a single account for all intangible assets. The following summary discloses the debit entries that have been recorded during 2012.
1/2/12 Purchased patent (8-year life) $409,920
4/1/12 Goodwill (indefinite life) 378,400
7/1/12 Purchased franchise with 10-year life; expiration date 7/1/22 463,900
8/1/12 Payment of copyright (5-year life) 174,240
9/1/12 Research and development costs 238,500
$1,664,960
(a) Prepare the necessary entries to clear the Intangible Assets account and to set up separate accounts for distinct types of intangibles.
(b) Make the entry as of December 31, 2012, recording any necessary amortization.
(c) Reflect all balances accurately as of December 31, 2012. (Use straight-line amortization.)
Question 5 - Fontenot Corporation was organized in 2011 and began operations at the beginning of 2012. The company is involved in interior design consulting services. The following costs were incurred prior to the start of operations.
Attorney's fees in connection with organization of the company $15,120
Purchase of drafting and design equipment 14,600
Costs of meetings of incorporators to discuss organizational activities 6,000
State filing fees to incorporate 1,040
$36,760
(a) Compute the total amount of organization costs incurred by Fontenot.
(b) Prepare the journal entry to record organization costs for 2012. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)