Question

3 of 4. Discounting a Note Receivable Cleveland Company obtained a $15,000 note receivable from a customer on Jan 1, 2018. The note, along with interest at 10%, is due on July 1, 2018. On Feb 28, 2018, Cleveland discounted the note at Cincinnati Bank. The bank's discount rate is 12%. Prepare the journal entries required on Feb 28, 2018, to accrue interest and to record the discounting (round all calculations to the nearest dollar) for Cleveland. Chapter 10: PPE & Intangibles Acquisition 5. Goodwil Johnson Corporation acquired all of the outstanding common stock of Smith Corporation for $11,000,000 in cash. The book value of Smith's net assets was $7,800,000. The fair values of all of Smith's assets and liabilities were equal to their book values with the Book Value 1,300,000 8,000,000 200,000 Fair Value 1,100,000 9,400,000 1,200,00 Receivables PPE Intangible Assets Calculate the amount paid for goodwill.

Answer 1

4.

Date	Account Titles	Debit	Credit
Feb 28, 2018	Interest Receivable	$250
	Interest Revenue		$250
Feb 28, 2018	Cash	$15,120
	Loss on sale of note receivable	$130
	Note Receivable		$15,000
	Interest Receivable		$250

Working note:

Feb 28, 2018:

Interest Revenue($15,000 * 10% * 2/12) = $250

Face Amount	$15,000
Interest to maturity($15,000 * 10% * 6/12)	$750
Maturity value	$15,750
Less: Discount($15,750 * 12% * 4/12)	($630)
Cash Proceeds	$15,120

5.

Value of consideration paid		$11,000,000
Less: Fair value of Net Assets
Book value of Net Assets	$7,800,000
Add: Fair Value excess of book value
Receivables($1,100,000 – $1,300,000)	($200,000)
PPE($9,400,000 - $8,000,000)	$1,400,000
Intangible Assets($1,200,000- $200,000)	$1,000,000	$10,000,000
Goodwill		$1,000,000

Hence, amount paid for goodwill is $1,000,000.