Question - Accounting for Goodwill
On July 1, 2010, Brandon Corporation purchased Mills Company by paying $250,000 cash and issuing a $150,000 note payable to Steve Mills. At July 1, 2010, the balance sheet of Mills Company was as follows:
|
Cash
|
$50,000
|
Accounts Payable
|
$200,000
|
|
Accounts Receivable
|
90,000
|
Stockholder's equity
|
235,000
|
|
Inventory
|
100,000
|
|
|
|
Land
|
40,000
|
|
|
|
Building (net)
|
75,000
|
|
|
|
Equipment (net)
|
70,000
|
|
|
|
Trademarks
|
10,000
|
|
|
|
$435,000
|
|
$435,000
|
The recorded amounts all approximate current values except for land (fair value of $80,000), inventory (fair value of $125,000), and trademarks (fair value of $15,000).
Prepare the July 1 entry for Brandon Corporation to record the purchase.
Prepare the December 31 entry for Brandon Corporation to record amortization of intangibles. The trademark has an estimated useful life of 4 years with a residual value of $3,000.