SURVEY OF ACCOUNTING 360DAY CONNECT CAR
5th Edition
ISBN: 9781260591811
Author: Edmonds
Publisher: MCG
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Chapter 6, Problem 19E
a.
To determine
Calculate the annual amortization expense for the given items.
b.
To determine
Show the effect of acquisition of the intangible assets and their related amortization expense for the Year 1 in a horizontal statement model.
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Dynamo Manufacturing paid cash to acquire the assets of an existing company. Among the assets acquired were the following items:
Patent with 4 remaining years of legal life
$
31,000
Goodwill
42,000
Dynamo’s financial condition just prior to the acquisition of these assets is shown in Required B.
Required
Compute the annual amortization expense for these items.
Record the acquisition of the intangible assets and the related amortization expense for year 1 in a horizontal statements model.
Use this information to answer the following 6 questions.
Madison Company acquired a depreciable asset at the beginning of Year 1 at a cost of $12 million. At December 31, Year 1, Madison gathered the following information related to this asset:
Carrying value of the asset at 12/31/Y1 $10 million
Fair value of the asset at 12/31/Y1 $7.5 million
Sum of expected future cash flows at 12/31/Y1 $10 million
Present value of expected future cash flows at 12/31/Y1 $8 million
Remaining useful life at 12/31/Y1 5 years
Determine the impact on Year 1 net income from depreciation and possible impairment under IFRS.
(Fair Value Estimate) Killroy Company owns a trade name that was purchased in an acquisition of McClellan Company. The trade name has a book value of $3,500,000, but according to GAAP, it is assessed for impairment on an annual basis. To perform this impairment test, Killroy must estimate the fair value of the trade name. (You will learn more about intangible asset impairments in Chapter 12.) It has developed the following cash flow estimates related to the trade name based on internal information. Each cash flow estimate reflects Killroy’s estimate of annual cash flows over the next 8 years. The trade name is assumed to have no salvage value after the 8 years. (Assume the cash flows occur atthe end of each year.)
Cash Flow Estimate
Probability Assessment
$380,000
20%
630,000
50%
750,000
30%
Instructions(a) What is the estimated fair value of the trade name? Killroy determines that the appropriate discount rate for this estimation is 8%.(b) Is the estimate developed for…
Chapter 6 Solutions
SURVEY OF ACCOUNTING 360DAY CONNECT CAR
Ch. 6 - 1. What is the difference between the functions of...Ch. 6 - Prob. 2QCh. 6 - Prob. 3QCh. 6 - 4. Define depreciation. What kind of asset...Ch. 6 - Prob. 5QCh. 6 - Prob. 6QCh. 6 - Prob. 7QCh. 6 - 8. Explain the historical cost concept as it...Ch. 6 - Prob. 9QCh. 6 - Prob. 10Q
Ch. 6 - Prob. 11QCh. 6 - 12. Explain straight-line, units-of-production,...Ch. 6 - Prob. 13QCh. 6 - Prob. 14QCh. 6 - Prob. 15QCh. 6 - Prob. 16QCh. 6 - 17. What is salvage value?Ch. 6 - Prob. 18QCh. 6 - Prob. 19QCh. 6 - Prob. 20QCh. 6 - Prob. 21QCh. 6 - 22. Why would a company choose to depreciate one...Ch. 6 - Prob. 23QCh. 6 - 27. How are capital expenditures made to improve...Ch. 6 - Prob. 25QCh. 6 - Prob. 26QCh. 6 - Prob. 27QCh. 6 - Prob. 28QCh. 6 - Prob. 1ECh. 6 - Prob. 2ECh. 6 - Prob. 3ECh. 6 - Prob. 4ECh. 6 - Prob. 5ECh. 6 - LO 8-1 Exercise 8-6 A Allocating costs for a...Ch. 6 - Effect of depreciation on the accounting equation...Ch. 6 - Prob. 8ECh. 6 - Prob. 9ECh. 6 - Prob. 10ECh. 6 - Events related to the acquisition, use, and...Ch. 6 - Prob. 12ECh. 6 - Prob. 13ECh. 6 - Prob. 14ECh. 6 - Prob. 15ECh. 6 - Prob. 16ECh. 6 - Prob. 17ECh. 6 - Prob. 18ECh. 6 - Prob. 19ECh. 6 - Prob. 20ECh. 6 - Prob. 21ECh. 6 - Accounting for acquisition of assets, including a...Ch. 6 - Calculating depreciation expense using three...Ch. 6 - Determining the effect of depreciation expense on...Ch. 6 - Prob. 25PCh. 6 - Prob. 26PCh. 6 - Prob. 27PCh. 6 - Prob. 28PCh. 6 - Revision of estimated salvage value Delta Machine...Ch. 6 - Purchase and use of tangible asset: Three...Ch. 6 - Recording continuing expenditures for plant assets...Ch. 6 - Prob. 32PCh. 6 - Prob. 33PCh. 6 - Prob. 34PCh. 6 - Prob. 35PCh. 6 - Performing ratio analysis using real-world data...Ch. 6 - Prob. 1ATCCh. 6 - ATC 6-3 Research Assignment Comparing Microsofts...Ch. 6 - Prob. 4ATCCh. 6 - ATC 6-5 Ethical Dilemma Whats an expense? Several...
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- Dynamo Manufacturing paid cash to acquire the assets of an existing company. Among the assets acquired were the following items. Patent with 4 remaining years of legal life $38,600 Goodwill 36,100 Dynamo’s financial condition just prior to the acquisition of these assets is shown in the following statements model. Balance Sheet Income Statement Assets = Liabilities + Stockholders’ Equity Revenue − Expenses = Net Income Statement of Cash Flows Cash + Patent + Goodwill 92,500 + NA + NA = NA + 92,500 NA − NA = NA NA Required Compute the annual amortization expense for these items. Show the acquisition of the intangible assets and the related amortization expense for Year 1 in a horizontal statements model. Prepare the journal entries to record the acquisition of the intangible assets and the related amortization for year 1.arrow_forwardInvestment Property Determine the cost of the following items of investment acquired by Sasha Corporation during 2022; Land site for capital appreciation was acquired for P8,600,000. The company paid P430,000 commission to a real estate agent. Costs of P 135,000 were incurred to clear the land. During the course of clearing the land, timber and gravel were recovered and sold for P 65,000. The cost of investment property is _____________ Land and building were acquired to be held for under operating leases. The company made a de payment of P4,000,000, issued 20,000 P200 par ordinary shares with a market price of P240 per share, and issued a three-year non-interest-bearing note for P6,000.000 note is payable in equal annual installments of P2,000,000 at the end of each year from the date of purchase. The prevailing interest rate for similar notes is 10%. 30% of the purchase price is allocated to the land. Investment property is recorded at __________arrow_forwardA company may acquire plant assets (among other ways) for cash, on a deffered payment plan, by exchanging other assets, or by a combination of these ways. Required: Identify six costs that should be capitalized as the cost of the land. For your answer, assume that land with an existing building is acquired for cash and that the existing building is to be removed in the immediate future so that a new building can be constructed on the site! At what amount should a company capitalize a plant asset acquired on a deffered payment plan? In general, at what amount should plant assets received in exchange for other nonmonetery assets to be recorded a new machine acquired by exchanging an older, similar machine and paying cash? Would your answe be the same if cash were received?arrow_forward
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