Question
Pleasantville Company had the following balance sheet on January 1. Pleasantville Company Balance Sheet January 1 1 Cash $175,000.00 Accounts Payable $57,000.00 2 Inventory 157,000.00
Pleasantville Company had the following balance sheet on January 1.
Pleasantville Company |
Balance Sheet |
January 1 |
1 | Cash | $175,000.00 | Accounts Payable | $57,000.00 |
2 | Inventory | 157,000.00 | Notes Payable | 250,000.00 |
3 | Property, Plant, and Equipment | 200,000.00 | Mortgage Payable | 150,000.00 |
4 | Patent | 25,000.00 | Retained Earnings | 100,000.00 |
5 |
| $557,000.00 |
| $557,000.00 |
On January 2, Carrs Company came to an agreement to purchase Pleasantville by acquiring all of its outstanding shares for $575,000 in cash. On that date in time, the fair value of their inventory was $150,000, and the fair value of the equipment was $225,000. The book value equals the fair value for all other accounts listed.
Required:
1. | Compute the goodwill associated with the purchase of Pleasantville. |
2. | Prepare the journal entry necessary at January 2, to record the acquisition of Pleasantville. |
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1. Compute the goodwill associated with the purchase of Pleasantville.
2. Prepare the journal entry necessary at January 2, to record the acquisition of Pleasantville.
General Journal Instructions
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GENERAL JOURNAL
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Which of the following statements concerning intangibles is true?
The registration of a trademark or trade name lasts for 20 years and is nonrenewable.
Organization costs must be expensed as incurred.
A patent should be amortized over the shorter of the inventor's life or its economic life.
A copyright should be considered an intangible with an indefinite life.
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