Computing Goodwill from the Purchase ofa Business and Related Depreciation and Amortization
The notes to a recent annual report from Weebok Corporation included the following:
Business Acquisitions During the current year, the Company acquired the assets of Sport Shoes. Inc.… |
Assume that Weebok acquired Sport Shoes on January 5, 2010. Weebok acquired the name of the company and all of its assets for $500,000 cash. Weebok did not assume the liabilities. The transaction was closed on January 5, 2010, at which time the balance sheet of Sport Shoes reflected the following book values and an independent appraiser estimated the following market values for the assets:
Sport Shoes, Inc. | ||||
January 5, 2010 | Book Value | Market Value* | ||
Accounts receivable (net) | $ 41,000 | $ 41,000 | ||
Inventory | 215,000 | 200,000 | ||
Fixed assets (net) | 33,000 | 50,000 | ||
Other assets | 4,000 | 10,000 | ||
Total assets | $293,000 |
| ||
Liabilities | $55,000 | |||
Stockholders’ equity | 238,000 | |||
Total liabilities and stockholders’ equity | $293,000 | |||
Required:
1. Compute the amount of goodwill resulting from the purchase.(Hint: Assets are purchased at market value in conformity with the cost principle.)
2. Compute the adjustments that Weebok would make at the end of the annual accounting period. December31, 2010, for the following:
a. Depreciation of the fixed assets (straight line), assuming an estimated remaining useful life of 10 years and no residual value.
b. Goodwill (an intangible asset with an indefinite life).
We need at least 9 more requests to produce the solution.
1 / 10 have requested this problem solution
The more requests, the faster the answer.