1.

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	$41,400
Goodwill	43,700

Dynamos 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
95,200	+	NA	+	NA	=	NA	+	95,200	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.

2.

Bensen Company started business by acquiring $27,000 cash from the issue of common stock on January 1, Year 1. The cash acquired was immediately used to purchase equipment for $27,000 that had a $4,200 salvage value and an expected useful life of four years. The equipment was used to produce the following revenue stream (assume that all revenue transactions are for cash). At the beginning of the fifth year, the equipment was sold for $4,630 cash. Bensen uses straight-line depreciation.

	Year 1	Year 2	Year 3	Year 4	Year 5
Revenue	$7,530	$8,030	$8,230	$7,030	$0

Required A. Prepare income statements,

B. statements of changes in stockholders equity,

C. balance sheets,

D. statements of cash flows for each of the five years.

E. Present the statements in the form of a vertical statements model.