Problem 2 (Accounting for Goodwill) On January 1, 2019, Chan Inc. purchased all the net assets of Peter Company in a business combination transaction by paying $350,000 cash. On January 1, 2019, the statement of financial position of Peter Company was as follows: $260,000 Buildings (net) Equipment (net) Copyrights $80,000 60,000 40,000 Equity Accounts Payable 120,000 $380,000 Land Inventory Accounts Receivable 100,000 10,000 60,000 30,000 Cash $380,000 The recorded amounts all approximate current values except for buildings (fair value of $90,000), equipment (fair value of $80,000), and copyrights (fair value of $50,000). Instructions (a) Prepare the July 1 entry for Chan Inc. to record the purchase. (Goodwill = purchase price fair value of the net assets of Peter Company) (b) Prepare the December 31 entry for Chan Inc. to record the amortization of copyrights. The copyrights has an estimated useful life of 4 years with a residual value of $2,000. Assume Chan Inc. uses the straight line method to compute amortization of copyrights