Accounting for intangibles [20-25 min]
Midland Telecom provides communication services in Iowa, Nebraska, the Dakotas, and Montana. Midland purchased goodwill as part of the acquisition of Shipley Wireless Company, which had the following figures:
Book value of assets...... | $ 750,000 |
Market value of assets.... | 1,000,000 |
Liabilities........................ | 530,000 |
Requirement
1. Journalize the entry to record Midland’s purchase of Shipley Wireless for $320,000 cash plus a $480,000 note payable.
2. What special asset does Midland’s acquisition of Shipley Wireless identify? How should Midland Telecom account for this asset after acquiring Shipley Wireless? Explain in detail.
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