Dynamo Manufacturing paid cash to acquire the assets of an existing company. Among the assets acquired were the following items. Patent with 4 remaining years of legal life $38,600 Goodwill 36,100 Dynamo’s financial condition just prior to the acquisition of these assets is shown in the following statements model. Balance Sheet Income Statement Assets = Liabilities + Stockholders’ Equity Revenue − Expenses = Net Income Statement of Cash Flows Cash + Patent + Goodwill 92,500 + NA + NA = NA + 92,500 NA − NA = NA NA Required Compute the annual amortization expense for these items. Show the acquisition of the intangible assets and the related amortization expense for Year 1 in a horizontal statements model. Prepare the journal entries to record the acquisition of the intangible assets and the related amortization for year 1.
Dynamo Manufacturing paid cash to acquire the assets of an existing company. Among the assets acquired were the following items. Patent with 4 remaining years of legal life $38,600 Goodwill 36,100 Dynamo’s financial condition just prior to the acquisition of these assets is shown in the following statements model. Balance Sheet Income Statement Assets = Liabilities + Stockholders’ Equity Revenue − Expenses = Net Income Statement of Cash Flows Cash + Patent + Goodwill 92,500 + NA + NA = NA + 92,500 NA − NA = NA NA Required Compute the annual amortization expense for these items. Show the acquisition of the intangible assets and the related amortization expense for Year 1 in a horizontal statements model. Prepare the journal entries to record the acquisition of the intangible assets and the related amortization for year 1.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Dynamo Manufacturing paid cash to acquire the assets of an existing company. Among the assets acquired were the following items.
| Patent with 4 remaining years of legal life | $38,600 |
|---|---|
| 36,100 |
Dynamo’s financial condition just prior to the acquisition of these assets is shown in the following statements model.
| Income Statement | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Assets | = | Liabilities | + | Revenue | − | Expenses | = | Net Income | Statement of |
|||||
| Cash | + | Patent | + | Goodwill | ||||||||||
| 92,500 | + | NA | + | NA | = | NA | + | 92,500 | NA | − | NA | = | NA | NA |
Required
- Compute the annual amortization expense for these items.
- Show the acquisition of the intangible assets and the related amortization expense for Year 1 in a horizontal statements model.
- Prepare the
journal entries to record the acquisition of the intangible assets and the related amortization for year 1.
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