Chapter 2, Problem 1DYS

NaviNow Company agrees to pay $20 million in cash to the four former owners of TrafficEye for all of its assets and liabilities. These four owners of TrafficEye developed and patented a technology for realtime monitoring of traffic patterns on the nation’s top 200 frequently congested highways. NaviNow plans to combine the new technology with its existing global positioning systems and projects a resulting substantial revenue increase.As part of the acquisition contract, NaviNow also agrees to pay additional amounts to the former owners upon achievement of certain financial goals. NaviNow will pay $8 million to the four former owners of TrafficEye if revenues from the combined system exceed $100 million over the next three years. NaviNow estimates this contingent payment to have a probability adjusted present value of $4 million.The four former owners have also been offered employment contracts with NaviNow to help with system integration and performance enhancement issues. The…

Jonas Tech Corporation recently acquired Innovation Plus Company. The combined firm consists of three related businesses that will serve as reporting units. In connection with the acquisition, Jonas requests your help with the following asset valuation and allocation issues. Support your answers with references to FASB ASC as appropriate.Jonas recognizes several identifiable intangibles from its acquisition of Innovation Plus. It expresses the desire to have these intangible assets written down to zero in the acquisition period.The price Jonas paid for Innovation Plus indicates that it paid a large amount for goodwill. However, Jonas worries that any future goodwill impairment may send the wrong signal to its investors about the wisdom of the Innovation Plus acquisition. Jonas thus wishes to allocate the combined goodwill of all of its reporting units to one account called Enterprise Goodwill. In this way, Jonas hopes to minimize the possibility of goodwill impairment because a decline…

In 2024, Bratten Fitness Company made the following cash purchases: The exclusive right to manufacture and sell the X-Core workout machine from Symmetry Corporation for $201,000. Symmetry created the unique design for the equipment. Bratten also paid an additional $10,500 in legal and filing fees to attorneys to complete the transaction. An initial fee of $250,000 for a three-year agreement with Silver’s Gym to use its name for a new facility in the local area. Silver’s Gym has locations throughout the country. Bratten is required to pay an additional fee of $5,100 for each month it operates under the Silver’s Gym name, with payments beginning in March of 2024. Bratten also purchased $401,000 of exercise equipment to be placed in the new facility. The exclusive right to sell Healthy Choice, a book authored by Kent Patterson, for $20,000. The book includes healthy recipes, recommendations for dietary supplements, and natural remedies. Bratten plans to display the book at the check-in…