Alto Company purchases Franz Company for $13,985,000 cash on January 1, 2022.The book value of Franz Company's net assets reported on its December 31, 2021statement of financial position was $12,620,000. Alto's December 31, 2021 analysisindicated that the fair value of Franz's tangible assets exceeded the book value by$560,000, and the fair value of identifiable intangible assets exceeded book value by$245,000.How much goodwill should be recognized by Alto Company when recording thepurchase of Franz? $

1. In simple terms, goodwill is measured as the difference between: the consideration paid plus any…

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Accounting

How much goodwill should be recognized by Alto Company when recording the purchase of Franz? $

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter11: Long-term Assets

Section: Chapter Questions

Problem 10PA: Buchanan Imports purchased McLaren Corporation for $5,000,000 cash when McLaren had net assets worth...

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On May 1, 2015, Zoe Inc. purchased Branta Corp. for $15,000,000 in cash. They only received $12,000,000 in net assets. In 2016, the market value of the goodwill obtained from Branta Corp. was valued at $4,000,000, but in 2017 it dropped to $2,000,000. Prepare the journal entry for the creation of goodwill and the entry to record any impairments to it in subsequent years.
Gray Companys financial statements showed income before income taxes of 4,030,000 for the year ended December 31, 2020, and 3,330,000 for the year ended December 31, 2019. Additional information is as follows: Capital expenditures were 2,800,000 in 2020 and 4,000,000 in 2019. Included in the 2020 capital expenditures is equipment purchased for 1,000,000 on January 1, 2020, with no salvage value. Gray used straight-line depreciation based on a 10-year estimated life in its financial statements. As a result of additional information now available, it is estimated that this equipment should have only an 8-year life. Gray made an error in its financial statements that should be regarded as material. A payment of 180,000 was made in January 2020 and charged to expense in 2020 for insurance premiums applicable to policies commencing and expiring in 2019. No liability had been recorded for this item at December 31, 2019. The allowance for doubtful accounts reflected in Grays financial statements was 7,000 at December 31, 2020, and 97,000 at December 31, 2019. During 2020, 90,000 of uncollectible receivables were written off against the allowance for doubtful accounts. In 2019, the provision for doubtful accounts was based on a percentage of net sales. The 2020 provision has not yet been recorded. Net sales were 58,500,000 for the year ended December 31, 2020, and 49,230,000 for the year ended December 31, 2019. Based on the latest available facts, the 2020 provision for doubtful accounts is estimated to be 0.2% of net sales. A review of the estimated warranty liability at December 31, 2020, which is included in other liabilities in Grays financial statements, has disclosed that this estimated liability should be increased 170,000. Gray has two large blast furnaces that it uses in its manufacturing process. These furnaces must be periodically relined. Furnace A was relined in January 2014 at a cost of 230,000 and in January 2019 at a cost of 280,000. Furnace B was relined for the first time in January 2020 at a cost of 300,000. In Grays financial statements, these costs were expensed as incurred. Since a relining will last for 5 years, Grays management feels it would be preferable to capitalize and depreciate the cost of the relining over the productive life of the relining. Gray has decided to nuke a change in accounting principle from expensing relining costs as incurred to capitalizing them and depreciating them over their productive life on a straight-line basis with a full years depreciation in the year of relining. This change meets the requirements for a change in accounting principle under GAAP. Required: 1. For the years ended December 31, 2020 and 2019, prepare a worksheet reconciling income before income taxes as given previously with income before income taxes as adjusted for the preceding additional information. Show supporting computations in good form. Ignore income taxes and deferred tax considerations in your answer. The worksheet should have the following format: 2. As of January 1, 2020, compute the retrospective adjustment of retained earnings for the change in accounting principle from expensing to capitalizing relining costs. Ignore income taxes and deferred tax considerations in your answer.
Buchanan Imports purchased McLaren Corporation for $5,000,000 cash when McLaren had net assets worth $4,500,000. A. What is the amount of goodwill in this transaction? B. What is Buchanans journal entry to record the purchase of McLaren? C. What journal entry should Buchanan write when the company internally generates additional goodwill in the year following the purchase of McLaren?
Zebra Company purchases Glow Inc. for $13,985,000 cash on January 1, 2023. The book value of Glow Inc. net assets reported on its December 31, 2022 statement of financial position was $12,620,000. Zebra’s December 31, 2022 analysis indicated that the fair value of Glow’s tangible assets exceeded the book value by $560,000, and the fair value of identifiable intangible assets exceeded book value by $245,000. How much goodwill should be recognized by Zebra Company when recording the purchase of Glow Inc
Floyd Company purchases Haeger Company for $2,400,000 cash on January 1, 2021. The book value of Haeger Company’s net assets, as reflected on its December 31, 2020 balance sheet is $1,860,000. An analysis by Floyd on December 31, 2020 indicates that the fair value of Haeger’s tangible assets exceeded the book value by $180,000, and the fair value of identifiable intangible assets exceeded book value by $135,000. How much goodwill should be recognized by Floyd Company when recording the purchase of Haeger Company?
Gulf Company purchases Arab Company for $900,000 cash on January 2, 2019. The book value of Arab Company’s net assets, as reflected on its December 31, 2018 balance sheet is $720,000. An analysis by Gulf on December 31, 2018 indicates that the fair value of Arab's tangible assets exceed the book value by $60,000, and the fair value of indefinite intangible assets exceed book value by $55,000. How much goodwill should recognized by Gulf company when recording the purchase of Arab Company? a. $98,000. b. $130,000. c. $-0-. d. $65,000.
Kirson Holdings Ltd. purchased the net assets of Baker Ltd. in January 2020 for $6,082,000. Kirson had appraisals conducted that indicated that the fair values of the assets purchased and liabilities assumed were as follows: Inventory $1,220,000 Patents $517,000 Accounts receivable 722,000 Accounts payable 595,000 Equipment 2,199,000 Bank loan payable 932,000 The patent acquired has 18 years remaining in its useful life. Kirson's management determined that it would contribute to the generation of revenues for five years, after which it would be obsolete. Determine the amount of goodwill Kirson acquired in the purchase. $4 Goodwill eTextbook and Media List of Accounts
Floyd Company purchases Haeger Company for $800,000cash on January 1, 2011. The book value of Haeger Company’s netassets, as reflected on its December 31, 2010 balance sheet, is$620,000. An analysis by Floyd on December 31, 2010 indicates thatthe fair value of Haeger’s tangible assets exceeded the book valueby $60,000, and the fair value of identifiable intangible assetsexceeded book value by $45,000. How much goodwill should berecognized by Floyd Company when recording the purchase of HaegerCompany? $0 $180,000 $120,000 $75,000
On July 15, 2021, Cottonwood Industries sold a patent and equipment to Roquemore Corporation for $910,000 and $405,000, respectively. On the date of the sale, the book value of the patent was $ $200,000, and the book value of the equipment was $496,000 (cost of $726,000 less accumulated depreciation of $230,000) Prepare the journal entries to record the sales of the patent and equipment 1 2 Record the sale of the patent for $910,000. On the date of the sale, the book value of the patent was $200,000.
On July 15, 2021, Cottonwood Industries sold a patent and equipment to Roque more Corporation for $910,000 and $405,000, respectively. On the date of the sale, the book value of the patent was $ $200,000, and the book value of the equipment was $496,000 (cost of $726,000 less accumulated depreciation of $230,000) Prepare the journal entries to record the sales of the patent and equipment < 1 2 Record the sale of the equipment for $405,000. On the date of the sale, the book value of the equipment was $496,000 (cost of $726,000 less accumulated depreciation of $230,000). Note: Enter debits before credits. Event 2 General Journal Debit Credit
On September 1, 2019, Winans Corporation acquired Aumont Enterprises for a cash payment of £800,000. At the time of purchase, Aumont’s statement of financial position showed assets of £600,000, liabilities of £200,000, and equity of £400,000. The fair value of Aumont’s assets is estimated to be £800,000. Compute the amount of goodwill acquired by Winans.
Grand Champion Inc. purchased America’s Sweethearts Corporation on January 1, 2019. At the time, America’s Sweethearts had the following assets and liabilities (stated at fair value): Cash $62,000 Accounts receivable 138,000 Inventory 185,000 Property, plant, and equipment 300,000 Patent 65,000 Accounts payable 200,000 Notes payable 325,000 Grand Champion paid $900,000 for America’s Sweethearts. Assume that America’s Sweethearts is a reporting unit of Grand Champion. At the end of 2020, America’s Sweethearts has a fair value of $720,000 and a book value of $850,000, which includes any goodwill recorded. Of this fair value, $350,000 is attributable to identifiable assets net of (or identifiable net assets) liabilities. Required: Calculate the impairment loss of goodwill (if any) and record the appropriate journal entry.