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July 1 Paid $72,000 in legal fees that resulted in the successful defense of the patent. This event changed the estimated remaining useful life to
July 1 Paid $72,000 in legal fees that resulted in the successful defense of the patent. This event changed the estimated remaining useful life to 5 years from July 1, 20x2. Aug 1 Sparky paid $4,000,000 to acquire all of the common stock of Wild Cat, Inc., which became a division of Sparky Wild Cat reported the following balance sheet at the time of acquisition: Current Assets $1,200,000 Current Liabilities $ 900,000 Plant & Equip (net) 3,800,000 Long-Term Debt 1,100,000 Stockholder's Equity 3,050,000 *On the date of the business combination, it was determined that the fair value of Wild Cat's Plant & Equipment was $4,150,000. For all other balance sheet accounts, Wild Cat's book value was equal to their fair value. At year-end, after recording the appropriate depreciation on the equipment, Dec 31 Sparky determined it was necessary to perform an impairment test due to rapid changes in demand for the one and only product this piece of equipment produces. Sparky estimated the future net cash flows of the equipment to be $50,000 per year for the next three years. Sparky intends to continue using the equipment and evaluates PP&E using a discount rate of 15%. (PV of $1,15%, 3n is 657 and PVOA, 15%, 3n is 2.625) A. a. Determine Amortization Expense for all of fiscal year 20x2 for Patent FJ190X: B. Determine the amount of Goodwill (if any) Sparky would report on their balance sheet dated December 31, 20x2 as a result of the business combination with Wild Cat. C. Determine the amount of the Impairment Loss (if any) Sparky would report for the Equipment as of December 31, 20x2
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