Question;Week Two - Homework Exercises E10-5, E10-6 and E10-7, and;E10-26;E10-5 Freitas;Corporation was organized early in 2013. The following expenditures were made;during the first few months of the year;Attorneys' fees in connection with the organization of the;corporation $12,000;State filing fees and other incorporation costs;3,000;Purchase of a patent;20,000;Legal and other fees for transfer of the patent;2,000;Purchase of furniture;30,000;Pre-opening salaries;40,000;Total;$107,000;Required: Prepare;a summary journal entry to record the $107,000 in cash expenditures.;E10-6 On March 31;2013, Wolfson Corporation acquired all of the outstanding common stock of;Barney Corporation for $17,000,000 in cash. The book values and fair values of;Barney?s assets and liabilities were as follows;Book;Value Fair Value;Current assets;$6,000,000 $7,500,000;Property, plant, and equipment 11,000,000 14,000,000;Other assets 1,000,000 1,500,000;Current liabilities 4,000,000 4,000,000;Long-term liabilities 6,000,000 5,500,000;Required: Calculate;the amount paid for goodwill.;E10-7 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 (assets minus;liabilities) was $7,800,000. The fair values of all of Smith?s assets and;liabilities were equal to their book values with the following exceptions;Book;Value Fair Value;Receivables;$1,300,000 $1,100,000;Property, plant, and equipment 8,000,000 9,400,000;Intangible assets 200,000 1,200,000;Required: Calculate;the amount paid for goodwill.;E10-26 In 2013, Space;Technology Company modified its model Z2 satellite to incorporate a new;communication device. The company made the following expenditures;Basic research to develop the technology;$2,000,000;Engineering design work 680,000;Development of a prototype device 300,000;Acquisition of equipment 60,000;Testing and modification of the prototype 200,000;Legal and other fees for patent application on the new;communication system 40,000;Legal fees for successful defense of the new patent 20,000;Total;$3,300,000;The equipment will be used on this and other research;projects. Depreciation on the equipment for 2013 is $10,000.;During your year-end review of the accounts related to;intangibles, you discover that the company has capitalized all of the above as;costs of the patents.;Managements contends that the device simply represents an;improvement of the existing communication system of the satellite and;therefore, should be capitalized.
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