E12-12B (LOI,2,3) (Accounting for Goodwill) OnJuly 1, 2017, Aeroplus Corporation

Question

E12-12B (LOI,2,3) (Accounting for Goodwill) OnJuly 1, 2017, Aeroplus Corporation purchased Johnson Company by pay- ing $187 500 cash and issuing a $65000 note payable to Steve Johnson. At July 1, 2017, the balance sheet of Johnson Company was as follows. $ 38,500 66,500 75,000 30,000 56,250 52,500 7,500 5326,250 Accounts payable Stockholders' equity 160,000 166,250 326,250 Cash Inventory Land Buildings (net) Equipment (net) Copyrights The recorded amounts all approximate current values except for land (worth $45,000), inventory (worth $93,750), and copyrights (worth $11,250). (a) Prepare the July 1 entry for Aeroplus Corporation to record the purchase. (b) Prepare the December 31 entry for Aeroplus Corporation to record amortization of intangibles. The copyrights have an estimated useful life of 4 years with a residual value of $2,450.

Explanation / Answer

JOURNAL ENTRIES ACCOUNTS TITLE DR in $ CR in $ Cash acount Dr. 38500 Receivables Dr. 66500 Inventory Dr. 93750 Land Dr. 45000 Building Dr. 56250 Equipment Dr. 52500 Copyrights Dr. 11250 Goodwill Account Dr. (Bal.Fig.) 48750 Accounts payable Cr. 160,000 Business Purchase Cr. 252500 (for recording purchase of business for consideration) Business Purchase Dr. 252500 Cash Account Cr. 187500 Note Payable Cr. 65000 (For payment of consideration)

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