Question
3a. Identify the different types of long-lived assets (2 marks) 3b. Explain the difference between tangible and intangible long-lived assets. (2 marks) 3c. Identify the
3a. Identify the different types of long-lived assets (2 marks)
3b. Explain the difference between tangible and intangible long-lived assets. (2 marks)
3c. Identify the three valuation methods that can be used to measure long lived assets? (3 marks)
3d. What type of assets can use each method. (3 marks)
3e.
Abe Manufacturing Corp. decided to expand further by purchasing the net assets of ERB Manufacturing Corp. ERBs statement of financial position at December 31, 2023 follows.
ERB MANUFACTURING CORP.
Statement of Financial Position
December 31, 2023
Assets Liabilities and Equities
Cash $210,000 Accounts payable $ 325,000
Receivables $450,000 Common shares $800,000
Inventory $275,000 Retained earnings $835,000
Plant assets (net) $1,025,000
Total assets $1,960,000 Total liabilities and equities $1,960,000
An appraisal, agreed to by both parties, indicated that the fair value of the inventory was $320,000 and the fair value of the plant assets was $1,225,000. The fair value of the receivables and payables is equal to the amount reported on the balance sheet. The agreed purchase price was $3 million, and this amount was paid in cash to the owners of ERB.
Instructions
Calculate the amount of goodwill (if any) implied in the purchase price of $3 million. Show calculations. (10 marks)
Prepare the journal entry for the acquisition. (5 marks)
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