中级财务会计英_会计分录汇总
中级财务会计英 会计分录汇总
考点1调整分录和结账分录
Ex. 3-125—Adjusting entries.
Present, in journal form, the adjustments that would be made on July
31, 2011, the end of the fiscal year, for each of the following.
1. The supplies inventory on August 1, 2010 was $7,350. Supplies
costing $20,150 were
acquired during the year and charged to the supplies inventory. A
count on July 31,
2011 indicated supplies on hand of $8,810.
2. On April 30, a ten-month, 9% note for $20,000 was received from a
customer. *3. On March 1, $12,000 was collected as rent for one year and
a nominal account
was credited.
Solution 3-125
1. Supplies Expense
........................................................................
18,690
Supplies
........................................................................
..... 18,690
2. Interest Receivable
......................................................................
450
Interest Revenue
............................................................... 450
*3. Rent Revenue
........................................................................
...... 7,000
Unearned Revenue
........................................................... 7,000
Adjusting entries. Ex. 3-126—
Reed Co. wishes to enter receipts and payments in such a manner that
adjustments at the end of the period will not require reversing entries
at the beginning of the next period. Record the following transactions
in the desired manner and give the adjusting entry on December 31, 2010.
(Two entries for each part.)
1. An insurance policy for two years was acquired on April 1, 2010
for $8,000.
2. Rent of $12,000 for six months for a portion of the building was
received on
November 1, 2010.
Solution 3-126
1. Prepaid Insurance
........................................................................
.. 8,000
Cash
........................................................................
.......... 8,000
Insurance Expense
........................................................................
3,000
Prepaid Insurance
............................................................. 3,000
2. Cash
........................................................................
..................... 12,000
Unearned Rent
..................................................................
12,000
Unearned Rent
........................................................................
...... 4,000
Rent Revenue
...................................................................
4,000 Pr. 3-133—Adjusting entries and account classification.
Selected amounts from Trent Company's trial balance of 12/31/10
appear below:
1. Accounts Payable $ 160,000
2. Accounts Receivable 150,000
3. Accumulated Depreciation—Equipment 200,000
4. Allowance for Doubtful Accounts 20,000
5. Bonds Payable 500,000
6. Cash 150,000
7. Common Stock 60,000
8. Equipment 840,000
9. Insurance Expense 30,000
10. Interest Expense 10,000
11. Merchandise Inventory 300,000
12. Notes Payable (due 6/1/11) 200,000
13. Prepaid Rent 150,000
14. Retained Earnings 818,000
15. Salaries and Wages Expense 328,000
(All of the above accounts have their standard or normal debit or
credit balance.)
Part A. Prepare adjusting journal entries at year end, December 31,
2010, based on
the following supplemental information.
a. The equipment has a useful life of 15 years with no salvage
value. (Straight-line
method being used.)
b. Interest accrued on the bonds payable is $15,000 as of 12/31/10.
c. Expired insurance at 12/31/10 is $20,000.
d. The rent payment of $150,000 covered the six months from November
30, 2010
through May 31, 2011.
e. Salaries and wages earned but unpaid at 12/31/10, $22,000.
Part B. Indicate the proper balance sheet classification of each of
the 15 numbered
accounts in the 12/31/10 trial balance before adjustments by placing
appropriate numbers after each of the following classifications. If
the account
title would appear on the income statement, do not put the number in
any of
the classifications.
a. Current assets
b. Property, plant, and equipment
c. Current liabilities
d. Long-term liabilities
e. Stockholders' equity
Solution 3-133
Part A.
a. Depreciation Expense—Equipment ($840,000 – 0) , 15
..................... 56,000
Accumulated Depreciation—Equipment
.................................. 56,000
b. Interest Expense
........................................................................
........... 15,000
Interest Payable
.......................................................................
15,000
c. Prepaid Insurance
........................................................................
......... 10,000
Insurance Expense ($30,000 - $20,000)
................................. 10,000
d. Rent Expense ($150,000 , 6)
................................................................ 25,000
Prepaid Rent
........................................................................
.... 25,000
e. Salaries and Wages Expense
............................................................... 22,000
Salaries and Wages Payable
................................................... 22,000 Pr. 3-134—
Adjusting entries.
Data relating to the balances of various accounts affected by
adjusting or closing entries appear below. (The entries which caused the
changes in the balances are not given.) You are asked to supply the
missing journal entries which would logically account for the changes in
the account balances.
1. Interest receivable at 1/1/10 was $1,000. During 2010 cash
received from debtors for
interest on outstanding notes receivable amounted to $5,000. The
2010 income
statement showed interest revenue in the amount of $5,400. You are
to provide the
missing adjusting entry that must have been made, assuming reversing
entries are
not made.
2. Unearned rent at 1/1/10 was $5,300 and at 12/31/10 was $8,000.
The records indicate
cash receipts from rental sources during 2010 amounted to $40,000,
all of which was
credited to the Unearned Rent Account. You are to prepare the
missing adjusting
entry.
3. Accumulated depreciation—equipment at 1/1/10 was $230,000. At
12/31/10 the
balance of the account was $270,000. During 2010, one piece of
equipment was sold.
The equipment had an original cost of $40,000 and was 3/4
depreciated when sold.
You are to prepare the missing adjusting entry.
4. Allowance for doubtful accounts on 1/1/10 was $50,000. The
balance in the allowance
account on 12/31/10 after making the annual adjusting entry was
$65,000 and during
2010 bad debts written off amounted to $30,000. You are to provide
the missing
adjusting entry.
5. Prepaid rent at 1/1/10 was $9,000. During 2010 rent payments of
$120,000 were
made and charged to "rent expense." The 2010 income statement shows
as a general
expense the item "rent expense" in the amount of $125,000. You are
to prepare the
missing adjusting entry that must have been made, assuming reversing
entries are
not made.
6. Retained earnings at 1/1/10 was $150,000 and at 12/31/10 it was
$210,000. During
2010, cash dividends of $50,000 were paid and a stock dividend of
$40,000 was
issued. Both dividends were properly charged to retained earnings.
You are to provide
the missing closing entry.
Solution 3-134
1. Interest Receivable
........................................................................
1,400
Interest Revenue
............................................................... 1,400
Interest revenue per books $5,400
Interest revenue received related to 2010
($5,000 – $1,000) 4,000
Interest accrued $1,400
2. Unearned Rent Revenue
............................................................... 37,300
Rent Revenue
...................................................................
37,300
Cash receipts $40,000
Beginning balance 5,300
Ending balance (8,000)
Rent revenue $37,300
Solution 3-134 (cont.)
3. Depreciation Expense
..................................................................
70,000
Accumulated Depreciation—Equipment ...........................
70,000
Ending balance $270,000
Beginning balance 230,000
Difference 40,000
Write-off at time of sale 3/4 × $40,000 30,000
$ 70,000
4. Bad Debt Expense
........................................................................
. 45,000
Allowance for Doubtful Accounts
....................................... 45,000
Ending balance $65,000
Beginning balance 50,000
Difference 15,000
Written off 30,000
$45,000
5. Rent Expense
........................................................................
........ 5,000
Prepaid Rent
.....................................................................
5,000
Rent expense $125,000
Less cash paid 120,000
Reduction in prepaid rent account $ 5,000
6. Income Summary
........................................................................
... 150,000
Retained Earnings
............................................................. 150,000
Ending balance $210,000
Beginning balance 150,000
Difference 60,000
Cash dividends $50,000
Stock dividends 40,000 90,000
$150,000
Pr. 3-135—Adjusting and closing entries.
The following trial balance was taken from the books of Fisk
Corporation on December 31, 2010.
Account Debit
Credit
Cash $ 12,000
Accounts Receivable 40,000
Note Receivable 7,000
Allowance for Doubtful Accounts $ 1,800
Merchandise Inventory 44,000
Prepaid Insurance 4,800
Furniture and Equipment 125,000
Accumulated Depreciation--F. & E. 15,000
Accounts Payable 10,800
Common Stock 44,000
Retained Earnings 55,000
Sales 280,000
Cost of Goods Sold 111,000
Salaries Expense 50,000
Rent Expense 12,800
Totals $406,600 $406,600
Pr. 3-135 (cont.)
At year end, the following items have not yet been recorded.
a. Insurance expired during the year, $2,000.
b. Estimated bad debts, 1% of gross sales.
c. Depreciation on furniture and equipment, 10% per year.
d. Interest at 6% is receivable on the note for one full year.
*e. Rent paid in advance at December 31, $5,400 (originally charged
to expense).
f. Accrued salaries at December 31, $5,800.
Instructions
(a) Prepare the necessary adjusting entries.
(b) Prepare the necessary closing entries.
Solution 3-135
(a) Adjusting Entries
a. Insurance Expense
.............................................................. 2,000
Prepaid Insurance
.............................................................. 2,000
b. Bad Debt Expense
......................................................................
2,800
Allowance for Doubtful Accounts
....................................... 2,800
c. Depreciation Expense
................................................................. 12,500
Accumulated Depreciation--F. & E.
.................................... 12,500
d. Interest Receivable
......................................................................
420
Interest Revenue
................................................................ 420
*e. Prepaid Rent
........................................................................
........ 5,400
Rent Expense
.....................................................................
5,400
f. Salaries Expense
........................................................................
5,800
Salaries Payable
................................................................ 5,800
(b) Closing Entries
Sales
........................................................................
............................ 280,000
Interest Revenue
........................................................................
......... 420
Income Summary
.....................................................................
280,420
Income Summary
........................................................................
........ 191,500
Salaries Expense
.....................................................................
55,800
Rent Expense
........................................................................
... 7,400
Depreciation Expense
.............................................................. 12,500
Bad Debt Expense
...................................................................
2,800
Insurance Expense
...................................................................
2,000
Cost of Goods Sold
..................................................................
111,000
Income Summary
........................................................................
........ 88,920
Retained Earnings
....................................................................
88,920 考点2应收帐款总价净价法，坏账处理，应收票据折价
Entries for bad debt expense. Ex. 7-136—
A trial balance before adjustment included the following:
Debit Credit
Accounts receivable $80,000
Allowance for doubtful accounts 730
Sales $340,000
Sales returns and allowances 8,000
Give journal entries assuming that the estimate of uncollectibles is
determined by taking (1) 5% of gross accounts receivable and (2) 1% of
net sales.
Solution 7-136
(1) Bad Debt Expense
...................................................................
3,270
Allowance for Doubtful Accounts ................................
3,270
Gross receivables $80,000
Rate 5%
Total allowance needed 4,000
Present allowance (730)
Adjustment needed $ 3,270
Solution 7-136 (cont.)
(2) Bad Debt Expense
...................................................................
3,320
Allowance for Doubtful Accounts ................................
3,320
Sales $340,000
Sales returns and allowances 8,000
Net sales 332,000
Rate 1%
Bad debt expense $ 3,320
Ex. 7-137—Accounts receivable assigned.
Accounts receivable in the amount of $250,000 were assigned to the
Fast Finance
Company by Marsh, Inc., as security for a loan of $200,000. The
finance company
charged a 4% commission on the face amount of the loan, and the note
bears interest at 9% per year.
During the first month, Marsh collected $130,000 on assigned
accounts. This amount was remitted to the finance company along with one
month's interest on the note.
Instructions
Make all the entries for Marsh Inc. associated with the transfer of
the accounts receivable, the loan, and the remittance to the finance
company.
Solution 7-137
Cash
........................................................................
.............................. 192,000 Finance Charge
........................................................................
............. 8,000
Notes Payable
........................................................................
... 200,000
Cash
........................................................................
.............................. 130,000
Accounts Receivable
.................................................................
130,000
Notes Payable
........................................................................
.............. 130,000 Interest Expense
........................................................................
............ 1,500
Cash
........................................................................
................. 131,500
PROBLEMS
Pr. 7-138—Entries for bad debt expense.
The trial balance before adjustment of Risen Company reports the
following balances:
Dr. Cr.
Accounts receivable $100,000
Allowance for doubtful accounts $ 2,500
Sales (all on credit) 750,000
Sales returns and allowances 40,000
Instructions
(a) Prepare the entries for estimated bad debts assuming that
doubtful accounts are
estimated to be (1) 6% of gross accounts receivable and (2) 1% of
net sales. (b) Assume that all the information above is the same, except
that the Allowance for
Doubtful Accounts has a debit balance of $2,500 instead of a credit
balance. How
will this difference affect the journal entries in part (a)?
Solution 7-138
(a) (1) Bad Debt Expense
.............................................................. 3,500
Allowance for Doubtful Accounts ............................ 3,500
Gross receivables $100,000
Rate 6%
Total allowance needed 6,000
Present allowance (2,500)
Bad debt expense $ 3,500
(2) Bad Debt Expense
.............................................................. 7,100
Allowance for Doubtful Accounts ............................ 7,100
Sales $750,000
Sales returns and allowances (40,000)
Net sales 710,000
Rate 1%
Bad debt expense $ 7,100
(b) The percentage of receivables approach would be affected as
follows:
Gross receivables $100,000
Rate 6%
Total allowance needed 6,000
Present allowance 2,500
Additional amount required $ 8,500
The journal entry is therefore as follows:
Bad Debt Expense
.............................................................. 8,500
Allowance for Doubtful Accounts ............................ 8,500
The entry would not change under the percentage of sales method.
Pr. 7-140—Accounts receivable assigned.
Prepare journal entries for Mars Co. for:
(a) Accounts receivable in the amount of $500,000 were assigned to
Utley Finance Co.
by Mars as security for a loan of $425,000. Utley charged a 3%
commission on the
accounts; the interest rate on the note is 12%.
(b) During the first month, Mars collected $200,000 on assigned
accounts after deducting
$450 of discounts. Mars wrote off a $530 assigned account.
(c) Mars paid to Utley the amount collected plus one month's
interest on the note.
Solution 7-140
(a) Cash
........................................................................
...................... 410,000
Finance Charge
........................................................................
....... 15,000
Notes Payable
.....................................................................
425,000
(b) Cash
........................................................................
...................... 200,000
Sales Discounts
........................................................................
....... 450
Allowance for Doubtful Accounts
..................................................... 530
Accounts
Receivable...........................................................
200,980
(c) Notes Payable
........................................................................
......... 200,000
Interest Expense
........................................................................
...... 4,250
Cash
........................................................................
............ 204,250
考点三存货盘存方法，折扣
Ex. 8-148—Recording purchases at net amounts.
Flint Co. records purchase discounts lost and uses perpetual
inventories. Prepare journal entries in general journal form for the
following:
(a) Purchased merchandise costing $900 with terms 2/10, n/30.
(b) Payment was made thirty days after the purchase.
Solution 8-148
(a) Inventory (.98 × $900)
.....................................................................
882
Accounts Payable
............................................................... 882 (b)
Accounts Payable
........................................................................
.... 882
Purchase Discounts Lost
................................................................. 18
Cash
........................................................................
............ 900 Ex. 8-149—Recording purchases at net amounts.
Dill Co. records purchases at net amounts and uses periodic
inventories. Prepare
entries for the following:
June 11 Purchased merchandise on account, $5,000, terms 2/10, n/30.
15 Returned part of June 11 purchase, $800, and received credit on
account.
30 Prepared the adjusting entry required for financial statements.
Solution 8-149
June 11 Purchases (.98 ×
$5,000).................................................... 4,900
Accounts Payable ...................................................
4,900
15 Accounts Payable (.98 × $800)
........................................... 784
Purchase Returns and Allowances......................... 784
30 Purchase Discounts Lost (.02 × $4,200)
............................ 84
Accounts Payable ...................................................
84
Pr. 8-159—Accounting for purchase discounts.
Otto Corp. purchased merchandise during 2010 on credit for $300,000;
terms 2/10, n/30. All of the gross liability except $60,000 was paid
within the discount period. The remainder was paid within the 30-day
term. At the end of the annual accounting period, December 31, 2010, 90%
of the merchandise had been sold and 10% remained in inventory. The
company uses a periodic system.
Instructions
(a) Assuming that the net method is used for recording purchases,
prepare the entries
for the purchase and two subsequent payments.
(b) What dollar amounts should be reported for the final inventory
and cost of goods sold
under the (1) net method; (2) gross method? Assume that there was no
beginning
inventory.
Solution 8-159
(a) Purchases
........................................................................
............................. 294,000
Accounts Payable
........................................................................
.... 294,000
(To record the purchase at net amount:
.98 × $300,000 = $294,000.)
Accounts Payable
........................................................................
................. 235,200
Cash
........................................................................
......................... 235,200
(To record payment within the discount period:
$300,000 – $60,000 = $240,000;.. .98 × $240,000 = $235,200.)
Accounts Payable
........................................................................
................. 58,800
Purchase Discounts Lost
........................................................................
...... 1,200
Cash
........................................................................
......................... 60,000
(To record the final payment.)
考点四，存货减值跌价准备LCM
Lower-of-cost-or-market. Ex. 9-143—
At 12/31/10, the end of Jenner Company's first year of business,
inventory was $4,100
and $2,800 at cost and at market, respectively.
Following is data relative to the 12/31/11 inventory of Jenner:
Original NetNet Realizable
Appropriate
Cost Replacement Realizable Value Less Inventory
Item Per Unit Cost Value Normal Profit Value
A $ .65 $ .45
B .45 .40
C .70 .75
D .75 .65
E .90 .85
Selling price is $1.00/unit for all items. Disposal costs amount to
10% of selling price and a
"normal" profit is 30% of selling price. There are 1,000 units of
each item in the 12/31/11
inventory.
Instructions
(a) Prepare the entry at 12/31/10 necessary to implement the lowerof-cost-or-market
procedure assuming Jenner uses a contra account for its balance
sheet. (b) Complete the last three columns in the 12/31/11 schedule
above based upon the
lower-of-cost-or-market rules.
(c) Prepare the entry(ies) necessary at 12/31/11 based on the data
above. (d) How are inventory losses disclosed on the income statement?
Solution 9-143
(a) Loss Due to Market Decline of Inventory
........................................ 1,300
Allowance to Reduce Inventory to Market ..........................
1,300
Solution 9-143 (Cont.)
(b) Original NetNet Realizable
Appropriate
Cost Replacement Realizable Value Less Inventory
Item Per Unit Cost Value Normal Profit Value
A $ .65 $ .45 $ .90 $ .60 $ .60
B .45 .40 .90 .60 .45
C .70 .75 .90 .60 .70
D .75 .65 .90 .60 .65
E .90 .85 .90 .60 .85
$3.45 $3.25*
*$3.25 × 1,000 = $3,250
(c) Allowance to Reduce Inventory to
Market....................................... 1,300
Cost of Goods Sold
............................................................. 1,300
Loss Due to Market Decline of Inventory
........................................ 200
Allowance to Reduce Inventory to Market ..........................
200
(Cost of inventory at 12/31/07 = $7,250)
OR
A student can record a recovery of $1,100.
(d) Inventory losses can be disclosed separately (below gross profit
in operating
expenses) or they can be shown as part of cost of goods sold.
Pr. 9-149—Gross profit method.
On December 31, 2010 Felt Company's inventory burned. Sales and
purchases for the year had been $1,400,000 and $980,000, respectively.
The beginning inventory (Jan. 1, 2010) was $170,000; in the past Felt's
gross profit has averaged 40% of selling price.
Instructions
Compute the estimated cost of inventory burned, and give entries as
of December 31, 2010 to close merchandise accounts.
Solution 9-149
Beginning inventory $ 170,000
Add: Purchases 980,000
Cost of goods available 1,150,000
Sales $1,400,000
Less 40% (560,000) 840,000
Estimated inventory lost $ 310,000
Sales
........................................................................
.............. 1,400,000
Income Summary
......................................................................
1,400,000
Cost of Goods Sold
........................................................................
........ 840,000 Fire Loss
........................................................................
........................ 310,000
Inventory
........................................................................
............ 170,000
Purchases...........................................................
....................... 980,000
处置出售捐赠Ex. 10-136—Donated assets.
Cheng Company has recently decided to accept a proposal from the
City of Bel Aire that publicly owned property with a large warehouse
located on it will be donated to Cheng if Cheng will build a branch
plant in Bel Aire. The appraised value of the property is
$490,000 and of the warehouse is $980,000.
Instructions
Prepare the entry by Cheng for the receipt of the properties.
Solution 10-136
Building (Warehouse)
........................................................................
.... 980,000 Land
........................................................................
............................... 490,000
Contribution
Revenue................................................................
1,470,000
Composite depreciation. Ex. 11-132—
Kemp Co. uses the composite method to depreciate its equipment. The
following totals are for all of the equipment in the group:
Initial Residual Depreciable Depreciation
Cost Value Cost Per Year
$700,000 $100,000 $600,000 $60,000
Instructions
(a) What is the composite rate of depreciation? (To nearest tenth of
a percent.) (b) A machine with a cost of $18,000 was sold for $11,000 at
the end of the third year.
What entry should be made?
Solution 11-132
(a) $60,000
———— = 8.6%
$700,000
(b) Cash
........................................................................
....................... 11,000
Accumulated Depreciation
............................................................. 7,000
Equipment
........................................................................
... 18,000
Pr. 11-135—Adjustment of Depreciable Base.
A truck was acquired on July 1, 2008, at a cost of $216,000. The
truck had a six-year useful life and an estimated salvage value of
$24,000. The straight-line method of depreciation was used. On January
1, 2011, the truck was overhauled at a cost of $20,000, which extended
the useful life of the truck for an additional two years beyond that
originally estimated (salvage value is still estimated at $24,000). In
computing
depreciation for annual adjustment purposes, expense is calculated
for each month the asset is owned.
Instructions
Prepare the appropriate entries for January 1, 2011 and December 31,
2011.
Solution 11-135
Cost $216,000
Less salvage value 24,000
Depreciable base, July 1, 2008 192,000
Less depreciation to date [($192,000 ? 6) × 2 1/2] 80,000
Depreciable base, Jan. 1, 2011 (unadjusted) 112,000
Overhaul 20,000
Depreciable base, Jan. 1, 2011 (adjusted) $132,000
January 1, 2011
Accumulated Depreciation
.....................................................................
20,000
Cash
........................................................................
.................. 20,000
December 31, 2011
Depreciation Expense
........................................................................
.... 24,000
Accumulated Depreciation ($132,000 ? 5.5 yrs)
....................... 24,000
Ex. 12-130
Barkley Corp. obtained a trade name in January 2009, incurring legal
costs of $15,000.
The company amortizes the trade name over 8 years. Barkley
successfully defended
its trade name in January 2010, incurring $4,900 in legal fees. At
the beginning of
2011, based on new marketing research, Barkley determines that the
fair value of the
trade name is $12,000. Estimated total future cash flows from the
trade name are
$13,000 on January 4, 2011.
Instructions
Prepare the necessary journal entries for the years ending December
31, 2009, 2010,
and 2011. Show all computations.
Solution 12-130
2009
Dec. 31 Amortization Expense - Trade Name 1,875
Trade Name 1,875
($15,000 ? 8 years)
2010
Dec. 31 Amortization Expense – Trade Name 2,575
Trade Name 2,575
[($15,000 - $1,875 + $4,900) ? 7 years]
2011
Dec. 31 Loss on Impairment 3,450
Trade Name 3,450
Carrying value = $15,000 - $1,875 + $4,900 - $2,575 = $15,450
Total future cash flows = 13,000
Therefore, an impairment loss has occurred
Carrying value = $15,450
Fair value = (12,000)
Loss on impairment = $ 3,450
2011
Dec. 31 Amortization Expense – Trade Name 2,000
Trade Name 2,000
($12,000 ? 6 years)
Pr. 12-145—Goodwill, impairment.
On May 31, 2011, Armstrong Company paid $3,500,000 to acquire all of
the common stock of Hall Corporation, which became a division of
Armstrong. Hall reported the following balance sheet at the time of the
acquisition:
Current assets $ 900,000 Current liabilities $ 600,000
Noncurrent assets 2,700,000 Long-term liabilities 500,000
Stockholders’ equity 2,500,000
Total liabilities and
Total assets $3,600,000 stockholders’ equity $3,600,000
It was determined at the date of the purchase that the fair value of
the identifiable net
assets of Hall was $2,800,000. At December 31, 2011, Hall reports
the following balance sheet information:
Current assets $ 800,000
Noncurrent assets (including goodwill recognized in purchase)
2,400,000
Current liabilities (700,000)
Long-term liabilities (500,000)
Net assets $2,000,000
It is determined that the fair market value of the Hall division is
$2,100,000. The recorded
amount for Hall’s net assets (excluding goodwill) is the same as
fair value, except for
property, plant, and equipment, which has a fair value of $200,000
above the carrying value.
Instructions
(a) Compute the amount of goodwill recognized, if any, on May 31,
2011. (b) Determine the impairment loss, if any, to be recorded on
December 31, 2011. (c) Assume that the fair value of the Hall division
is $1,900,000 instead of $2,100,000.
Prepare the journal entry to record the impairment loss, if any, on
December 31,
2011.
Solution 12-145
(a) Goodwill = Fair value of the division less the fair value of the
identifiable assets.
$3,500,000 – $2,800,000 = $700,000.
(b) No impairment loss is recorded, because the fair value of Hall
($2,100,000) is greater
than the carrying value ($2,000,000) of the new assets.
Solution 12-145 (Cont.)
(c) Computation of impairment loss:
Implied fair value of goodwill = Fair value of division less the
carrying value of the
division (adjusted for fair value changes), net of goodwill:
Fair value of Hall division $1,900,000
Carrying value of division $2,000,000
Increase in fair value of PP&E 200,000
Less goodwill (700,000)
(1,500,000)
Implied value of goodwill 400,000
Carrying amount of goodwill (500,000)
Loss on impairment $ (100,000)
Loss on Impairment
.......................................................................
100,000
Goodwill............................................................
................... 100,000
Ex. 12-135—Accounting for patent.
In early January 2009, Lerner Corporation applied for a patent,
incurring legal costs of $50,000. In January 2010, Lerner incurred
$9,000 of legal fees in a successful defense of its patent.
Instructions
(a) Compute 2009 amortization, 12/31/09 carrying value, 2010
amortization, and 12/31/10
carrying value if the company amortizes the patent over 10 years.
(b) Compute the 2011 amortization and the 12/31/11 carrying value,
assuming that at the
beginning of 2011, based on new market research, Lerner determines
that the fair value of
the patent is $44,000. Estimated future cash flows from the patent
are $45,000 on January 3,
2011.
Solution 12-135
(a) 2009 amortization: $50,000 ? 10 yrs. = $5,000
12/31/09 carrying value: $50,000 – $5,000 = $45,000
2010 amortization: ($45,000 + $9,000) ? 9 yrs. = $6,000
12/31/10 carrying value: ($45,000 + $9,000) – $6,000 = $48,000
(b) Since the expected future cash flows ($45,000) are less than the
carrying value ($48,000), an
impairment loss must be computed.
Loss on impairment: $48,000 carrying value – $44,000 fair value =
$4,000
2011 amortization: $44,000 ? 8 yrs. = $5,500
12/31/11 carrying value: $44,000 – $5,500 = $38,500
Ex. 12-138
Leon Corp. purchased Spinks Co. 4 years ago and at that time
recorded goodwill of
$300,000. The Sinks Division’s net assets, including goodwill, have
a carrying amount of
$700,000. The fair value of the division is estimated to be
$750,000.
Instructions
(a) Explain whether or not Leon Corp. must prepare an entry to
record impairment of the
goodwill. Include the entry, if necessary.
(b) Repeat instruction (a) assuming that the fair value of the
division is estimated to be
$650,000 and the implied goodwill is $225,000.
Solution 12-138
(a) The fair value of the division ($750,000) exceeds the carrying
amount of its assets
($700,000). Therefore, goodwill is not impaired and no entry is
necessary.
(b) The fair value of the division ($650,000) is less than the
carrying amount of its assets
($700,000). Therefore, goodwill is impaired. The amount of the
impairment loss is
$75,000, the difference between the recorded goodwill ($300,000) and
the implied
goodwill ($225,000).
Loss on Impairment 75,000
Goodwill 75,000
Ex. 12-139—Impairment of copyrights.
Presented below is information related to copyrights owned by Wamser
Corporation at December 31, 2010.
Cost $2,700,000
Carrying amount 2,350,000
Expected future net cash flows 2,100,000
Fair value 1,400,000
Assume Wamser will continue to use this asset in the future. As of
December 31, 2010, the copyrights have a remaining useful life of 5
years.
Instructions
(a) Prepare the journal entry (if any) to record the impairment of
the asset at December 31, 2010. (b) Prepare the journal entry to record
amortization expense for 2011.
(c) The fair value of the copyright at December 31, 2009 is
$1,500,000. Prepare the journal entry
(if any) necessary to record this increase in fair value.
Solution 12-139
(a) December 31, 2010
Loss on Impairment
........................................................................
............. 950,000
Copyrights
........................................................................
............... 950,000
Carrying amount $2,350,000
Fair value 1,400,000
Loss on impairment $ 950,000
(b) December 31, 2011
Amortization Expense
........................................................................
......... 280,000
Copyrights
........................................................................
............... 280,000
New carrying amount $1,400,000
Useful life ? 5 years
Amortization $ 280,000
(c) No entry necessary. Restoration of any impairment loss is not
permitted for assets held for
future use.
Ex. 12-142—Acquisition of tangible and intangible assets.
Vasquez Manufacturing Company decided to expand further by
purchasing Wasserman Company. The balance sheet of Wasserman Company as
of December 31, 2011 was as follows:
Wasserman Company
Balance Sheet
December 31, 2011
Assets Liabilities and Equities
Cash $ 210,000 Accounts payable $ 375,000
Receivables 550,000 Common stock 800,000
Inventory 275,000 Retained earnings 885,000
Plant assets (net) 1,025,000
Total assets $2,060,000 Total liabilities and equities $2,060,000
An appraisal, agreed to by the parties, indicated that the fair
market value of the inventory was $350,000 and that the fair market
value of the plant assets was $1,225,000. The fair market value of the
receivables is equal to the amount reported on the balance sheet. The
agreed purchase price was $2,075,000, and this amount was paid in cash
to the previous owners of Wasserman Company.
Instructions
Determine the amount of goodwill (if any) implied in the purchase
price of $2,075,000. Show calculations.
Solution 12-142
Purchase price $2,075,000
Less tangible net assets acquired:
Book value ($2,060,000 – $375,000) $1,685,000
Appraisal increment—inventory 75,000
Appraisal increment—plant assets 200,000
Total fair market value of tangible net assets acquired 1,960,000
Goodwill $ 115,000
*Ex. 12-143
MacroSoft Inc. has capitalized $600,000 of software costs. Sales
from this product were
$360,000 in the first year. MacroSoft estimates additional revenues
of $840,000 over the
product’s economic life of 5 years.
Instructions
Prepare the journal entry to record software cost amortization for
the first year. Show all
computations.
Solution 12-143
Computations: Percent of revenue approach
$600,000 x [$360,000/($360,000 + $840,000)] = $180,000
Straight-line approach
$600,000 x 1/5 = $120,000
Journal Entry:
Amortization Expense 180,000
Computer Software Costs 180,000