Accounting for intangible assets
Mia-Tora Company purchased a fast-food restaurant for $1,400,000. The fair market values of $130,000 the assets purchased were as follows. No liabilities were assumed.
Equipment | $320, 000 |
Land | 200,000 |
Building | 650,000 |
Franchise (5-year life) | 100,000 |
Required
a. Calculate the amount of goodwill purchased.
b. Prepare the journal entry to record the amortization of the franchise fee at the end of year 1. Problem 3-35A Accounting for goodwill
Springhill Co. purchased the assets of Canyon Co. for $1,000,000 in 2011. The estimated fair market value of the assets at the purchase date was $920,000. Goodwill of $80,000 was recorded at purchase. In 2012, because of negative publicity, one-half of the goodwill purchased from Canyon Co. was judged to be permanently impaired.
Required
a. How will Springhill account for the impairment of the goodwill?
b. Prepare the journal entry to record the permanent impairment of goodwill.
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