1.

Robinson Company purchased Franklin Company at a price of $3,840,000. The fair market value of the net assets purchased equals $2,700,000. 1. What is the amount of goodwill that Robinson records at the purchase date? 2. Does Robinson amortize goodwill at year-end? 3. Robinson believes that its employees provide superior customer service, and through their efforts, Robinson believes it has created $1,510,000 of goodwill. Should Robinson Company record this goodwill?

2.

Selected accounts from Gregor Co.s adjusted trial balance for the year ended December 31 follow. Prepare a classified balance sheet. Note: On the companys balance sheet, accumulated depreciation is subtracted from Equipment, accumulated amortization is subtracted from Patents, and accumulated depletion is subtracted from Silver mine.

Total equity	$	67,000			Accounts payable	$	3,700
Patents		7,400			Accumulated depreciationEquipment		28,300
Cash		7,700			Notes payable (due in 9 years)		28,000
Land		47,000			Goodwill		6,700
Equipment		37,000			Accumulated depletionSilver mine		6,400
Silver mine		32,000			Accumulated amortizationPatents		4,400

3.

Lok Co. reports net sales of $4,126,000 for Year 2 and $7,656,000 for Year 3. End-of-year balances for total assets are Year 1, $1,587,000; Year 2, $1,848,000; and Year 3, $1,971,000. (1) Compute Lok's total asset turnover for Year 2 and Year 3.

(2) Lok's competitor has a Total Asset Turnover of 3.0 during Year 3. Is Lok performing better or worse than its competitor on the basis of total asset turnover?

• Worse

• Better

4.

Gilly Construction trades in an old tractor for a new tractor, receiving a $21,500 trade-in allowance and paying the remaining $64,500 in cash. The old tractor had cost $107,000 and had accumulated depreciation of $58,125. Answer the following questions assuming the exchange has commercial substance. 1. What is the book value of the old tractor at the time of exchange? 2. What is the loss on this asset exchange? 3. What amount should be recorded (debited) in the asset account for the new tractor?