Intermediate Accounting Solution

BRIEF EXERCISE 12-3

Trade Name ...................................................................... 68,000

Cash .........................................................................

68,000

Trade Name Amortization Expense ................................ 8,500

Trade Name (€68,000 X 1/8 = €8,500) .....................

8,500

EXERCISE 12-3 (10–15 minutes)

(a)

(b)

Trademarks ........................................................................

Excess of cost over fair value of net identifiable

assets of acquired subsidiary (goodwill) ......................

Total intangible assets ......................................................

€20,000

75,000

€95,000

Organization costs, €24,000, should be expensed.

Bonds payable, €35,000, should be reported in the non-current liabilities

section.

Deposits with advertising agency for ads to promote goodwill of

company, €10,000, should be reported either as an expense or as

prepaid advertising in the current assets section. Advertising costs in

general are expensed when incurred or when first used.

Cost of equipment acquired for research and development projects,

€90,000, should be reported with property, plant, and equipment,

because the equipment has an alternative use.

Costs of developing a secret formula for a product that is expected to be

marketed for at least 20 years, €70,000, should be classified as research

and development expense on the income statement.

EXERCISE 12-12 (20–25 minutes)

Net assets of Terrell as reported

($575,000 – $350,000) .................................................

Adjustments to fair value

Increase in land value..........................................

Decrease in equipment value..............................

Net assets of Terrell at fair value .................................

Selling price ..................................................................

Amount of goodwill to be recorded .............................

$225,000...