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ID: 2406645 • Letter: W
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Intangible Asset
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Metlock Golf Inc. was formed on July 1, 2016, when Matt Magilke purchased the Old Master Golf Company. Old Master provides video golf instruction at kiosks in shopping malls. Magilke plans to integrate the instructional business into his golf equipment and accessory stores. Magilke paid $770,000 cash for Old Master. At the time, Old Master’s balance sheet reported assets of $630,000 and liabilities of $210,000 (thus owners’ equity was $420,000). The fair value of Old Master’s assets is estimated to be $830,000. Included in the assets is the Old Master trade name with a fair value of $10,000 and a copyright on some instructional books with a fair value of $57,600. The trade name has a remaining life of 5 years and can be renewed at nominal cost indefinitely. The copyright has a remaining life of 40 years.Warning
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SOLUTION
(A)
Metlock Golf Inc.
Intangibles Section of Balance Sheet
December 31, 2016
Schedule 1- Computation of Value of Old Master Copyright
Schedule 2 - Goodwill Measurement
Amortization expense for 2016 is $720 (Schedule 1). There is no amortization for the goodwill or the trade name, both of which are considered indefinite life intangible assets.
(B) Journal entry-
There is a full year of amortization on the Copyright. There is no amortization for the goodwill or the trade name, which is considered an indefinite life intangible.
Metlock Golf Inc.
Intangibles Section of Balance Sheet
December 31, 2017
Schedule 1- Computation of Value of Old Master Copyright
(C)
Amount ($) Trade name 10,000 Copyright (net accumulated amortization of $720) (Schedule 1) 56,880 Goodwill (Schedule 2) 150,000 Total intangibles 216,880Related Questions
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