SOLUTIONS – WEEK TWO – ACCT 305 Exercise 105 Calculation of goodwill:
Purchase price
$17,000,000
Less fair value of net assets: Assets Less: Liabilities assumed Goodwill
$23,000,000 (9,500,000) (13,500,000) $ 3,500,000
Exercise 1022 To expense R&D costs incorrectly capitalized.
Research and development expense (below)............................ ........................................................................................Patent ..................................................................................3,180,000
3,180,000
Research and development expenditures:
Basic research to develop the technology
$2,000,000
Engineering design work
680,000
Development of a prototype
300,000
Testing and modification of the prototype
200,000
Total
$3,180,000
To capitalize cost of equipment incorrectly capitalized as patent.
Equipment................................................................................ ........................................................................................Patent
60,000
60,000
To record depreciation on equipment used in R&D projects.
Research and development expense.......................................... ....................................Accumulated depreciation equipment
10,000 10,000
Problem 10-4 To reclassify various expenditures incorrectly charged to the intangible asset account. Organization cost expense........................................................ Prepaid insurance..................................................................... Copyright.................................................................................. Research and development expense.......................................... Patent ($3,000 + 12,000).......................................................... Franchise.................................................................................. Advertising expense................................................................. .........................................................................Intangible asset
7,000 6,000 20,000 40,000 15,000 40,000 16,000
144,000
To reclassify amount paid for Stiltz Corp. incorrectly charged to the intangible asset account.
Receivables............................................................................... Equipment................................................................................ Patent........................................................................................ Goodwill (determined below).................................................. .............................................................................Note payable .........................................................................Intangible asset
100,000 350,000 150,000 120,000
Calculation of goodwill: Purchase price
$500,000
Less: Market value of net assets
(380,000)
Goodwill
$120,000
220,000 500,000