On July 1, 2017, Brigham Corporation purchased Young Company by paying $250,000

Question

On July 1, 2017, Brigham Corporation purchased Young Company by paying $250,000 cash and issuing a $100,000 note payable to Steve Young. At July 1, 2017, the balance Question 4: 68 marks) sheet of Young Company was as follows $200,000 Accounts payable $ 50,000 90,000 100,000 40,000 75,000 70,000 10,000 $435,000 Stockholders' equity235,000 $435,000 Cash Accounts receivable Inventory Land Buildings (net) Equipment (net) Trademarks The recorded amounts all approximate current values except for land (fair value of S60,000), inventory (fair value of $125,000), and trademarks (fair value of $15,000. Instructions (a) Prepare the July 1 entry for Brigham Corporation to record the purchase. (b) 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 $3,000. Show all calculations

Explanation / Answer

Date Account Title Debit Credit 1-Jul-17 Investment in Young Company          50,000 Accounts receivables          90,000 Inventory      1,25,000 Land          60,000 Buildings          75,000 Equipments          70,000 Trademarks          15,000 Accounts Payables     2,00,000 Cash     1,00,000 Notes Payable     2,50,000 Goodwill (Bal Fig.)          65,000 Date Account Title Debit Credit 31-Dec-17 Amortisation Expenses            3,000 Accumulated Amortisation           3,000 Since question does not say about goodwill so it assumed that goodwill will be kept at its full value Working Notes Calculation of Goodwill: Issue of Notes Payable     1,00,000 Cash     2,50,000 Total Purchase consideration     3,50,000 Value of the assets Cash          50,000 Accounts receivables          90,000 Inventory      1,25,000 Land          60,000 Buildings          75,000 Equipments          70,000 Trademarks          15,000 Total Assets      4,85,000 Less: Liabilites      2,00,000 Net Value      2,85,000     2,85,000 Good Will        65,000 Amortisation of Patent Patent Value          15,000 Less: Residual Value            3,000 Value for amortisation          12,000 in four years            3,000 p.a

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