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 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 lower-of-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