What special asset does Heartland Telecom's acquisition of Surety Wireless identify? The acquisition identifies the asset goodw
ill . How should Heartland Telecom account for this asset after acquiring Surety Wireless? Explain in detail. Heartland Telecom should measure the ▼ of this asset each year. If this asset has increased in value, Heartland should ▼ . If the value of the asset has decreased, Heartland should
1 answer:
Answer: 1. Goodwill
2. a. Record no entry in the books
b. Record a loss in the books
Explanation:
1. The Special asset created by Heartland Telecom's acquisition of Surety Wireless is Goodwill.
Goodwill is the difference between what the company was worth and what it was purchased for if the purchase price was higher than the worth (market value).
2. a. Goodwill should be accounted for by recoding it in the Long term Assets under Intangible Assets in the balance sheet. It should not be amotrized. If Goodwill increases, there should be no recording this <u>gain</u> on the books.
b. If the value of the asset has decreased, Heartland should record a loss in the books to represent the loss on this account.
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Answer:
Explanation:
(a) The computation of the cost of goods sold is shown below:
= Beginning inventory + Purchase of new merchandise - ending inventory
= $4,000 + $22,000 - $4,500
= $21,500
(b) In the income statement, the total revenues and the total expenses are recorded.
If the total revenues are more than the total expenditure then the company earns net income
And, If the total revenues are less than the total expenditure then the company have a net loss
This net income or net loss would reflect in the statement of the retained earning account.
The preparation of the income statement is presented in the spreadsheet. Kindly find the attachment below:
