On August 1, 2020, Red Company decided to purchase Flower Company by paying $500,000 cash and issuing a $200,000 note payable to John Williams, the owner of Flower Company. As of August 1, 2020,the balance sheet of Flower Company was as follows:

The recorded amounts above are all current values except for the following:

Land (Fair value of $120,000)

Inventory (Fair value of $250,000)

Trademarks (Fair value of $30,000)

a. Prepare the August 1, 2020 entry for Red Company to record the acquisition of Flower Company.

b. Prepare the December 31, 2020 entry for Red Company to record the amortization of intangibles. The trademark has an estimated useful life of 10 years with a residual value of $6,000.

Cash Acct. Receivable Inventory Land Buildings (net) Equipment (net) Trademarks $100,000 180,000 200,000 80,000 150,000 140,000 20,000 $870,000 Accounts Payable Stockholders' Equity $400,000 470,000 $870,000