On July 1, 2014, Brigham Corporation purchased Young Company by paying $261,190

Question

On July 1, 2014, Brigham Corporation purchased Young Company by paying $261,190 cash and issuing a $150,880 note payable to Steve Young. At July 1, 2014, the balance sheet of Young Company was as follows.

The recorded amounts all approximate current values except for land (fair value of $79,610), inventory (fair value of $127,120), and trademarks (fair value of $15,400).

Prepare the December 31 entry for Brigham Corporation to record amortization of intangibles. The trademark has an estimated useful life of 4 years with a residual value of $3,376.

Explanation / Answer

Goodwill =All asset aquired -Liability -Amount paid

2)Goodwill on amalgamation is to amortized over 5 years = 43000 / 5 =$8600

for 2014 ,Amortization = 8600 * 6/12 =$ 4300

Trademark = (15400 -3376 )/4

                      = 12024/4

                       = 3006 per year

For 2014 = 3006 *6/12 = $ 1503

Total amortization = 1503 + 4300 = 5803

Entry :

Amortization expense      Debit      5803

Accumulated Amortization credit   5803

Title Debit credit Cash 50120 Accounts receivable 89530 Inventory 127120 Land 79610 Building 75330 Equipment 70180 Trade mark 15400 Goodwill(Balancing figure) 43000 Accounts payable 203100 Note payable 150880 cash 261190.

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