How will Needles account for the Boston goodwill in future accounting periods?

How will Needles account for the Boston goodwill in future accounting periods?

ABC Corporation acquired a patent for $120,000. The patent
has a legal life of 20 years. Because of changing technology, the patent is
expected to generate revenue for only 6 years. The annual amortization expense
for the patent is:

A) $6,000.

B) $20,000.

C) $0,
because the patent cost should be expensed when the patent is purchased.

D) $0,
because the patent is not amortized.

75

7.6-23 Research and
development costs incurred by a company should be:

A) capitalized
and depreciated over a period not to exceed 20 years.

B) capitalized
and amortized over the useful life of the asset.

C) either
capitalized and depreciated or expensed immediately at the option of the
accountant.

D) expensed
on the current year’s income statement.

7.6-24 The protection against copying computer
software programs comes from a:

A) patent.

B) trademark.

C) copyright.

D) license.

7.6-25 In 2011, First Company purchased Second Company for
$16,000,000 cash. At the time of purchase Second Company had $18,500,000 in
assets and liabilities of $11,000,000. The 2011 balance sheet for First Company
should show goodwill of:

A) $10,500,000.

B) $8,500,000.

C) $3,500,000.

D) $0.

76

7.6-26 Needles
Company purchased Boston Company on August 31, 2010. Needles recorded goodwill
in the purchase of Boston and has determined that the Boston goodwill will have
an indefinite life. How will Needles account for the Boston goodwill in future
accounting periods?

A) Needles
will amortize the Boston goodwill over a 50-year life.

B) If the
value of the Boston goodwill increases in subsequent years, Needles will
increase the value in the Boston Goodwill account.

C) If the
value of the Boston goodwill decreases in subsequent years, Needles will
decrease the value in the Boston Goodwill account.

D) Needles is
not allowed to change the value of the Boston Goodwill account regardless of
any future increase or decrease in the value of Boston goodwill.

7.6-27 Several intangible assets are
listed in Column I. For each question, select the definition of the intangible
in Column II which describes the intangible asset. Record your choice on the
line preceding the question number. An answer may only be used one time.

Column I




Column II

_____


1.

Copyright


A)

Federal
government grants that give the holder the exclusive right








for 20 years to
produce and sell an invention.

_____


2.

Franchises
and


B)

A
distinctive identification of a product or service.





licenses




_____


3.

Goodwill


C)

Excess
of the cost of an acquired company over the sum of the








market values of
its net assets.

_____


4.

Patent


D)

Exclusive
right issued by the federal government to reproduce and








sell a book,
musical composition, film or other work of art








extending for 70
years beyond the author’s life.

_____


5.

Trademark,


e.

Privileges
granted by a private business or a government to sell a





trade name



product or service
in accordance with specified conditions.

77

7.6-28 On August 15, 2010, Biddy Corp
purchased Mollie Corp for $16 million. At the time of purchase, the market
value of Mollie’s assets was $20,000,000 and Mollie had liabilities of
$5,000,000.

Record the
purchase transaction on Biddy Corp’s books.

7.6-29 On August 15, 2010, Biddy Corp purchased Mollie Corp for
$16 million. At the time of purchase, Mollie had assets of $20,000,000 and
liabilities of $5,000,000.

At the end
of 2011, Biddy estimated the Goodwill on the Mollie purchase to be worth only $800,000.

Prepare
the journal entry to record the change in the value of the goodwill.



Price: £ 45

100% Plagiarism Free & Custom Written, Tailored to your instructions

Leave your Comments


Can't read the image? click here to refresh