Answers:
a. Acquisition of cost of corporation = $2,420,000
Less: Fair value of net identifiable assets = $<u>2,050,000</u>
Cost of good will = $370,000
Note: Goods will is not amortized
b. Cost of patent purchase = $91,200
Legal life = 13 years
Estimated useful life= 8 years
Ammortization = Cost / Estimated useful life
= $91,200/8 years
=$11,400
Ammortization per annum is $11,400
Patent is purchased on 30/6/2021
Calculation of amortization for 6 months periods
Amortization for 6 months (July-December)= $11,400 * 6/12
=$5,700
Note: Amortization should be amortized on basis of their amortized value that is, 8 years.
c. Calculation of amortization cost for franchise
Cost = $250,800
Life=11
Purchased on 1/10/2021
Amortization = Cost / Estimated useful life
= $250,080/11
=$22,800
Amortization per annum is $22,800
Calculation of the amortization for 3 month period=
Amortization of 3 month (Oct-Dec.) = $22,800 * 3/12
=$5,700
d, Journal Entries Debit$ Credit$
Amortization Expenses 5,700
Patent 5,700
(To record the amortization expenses)
Amortization Expenses 5,700
Franchise 5,700
(To record the amortization expenses)
e. Partial Balance Sheet
Assets $ $
Current Assets
<u>Long term Assets</u>
Tangible assets 2,050,000
<u>Intangible assets</u>
Goodwill 370,000
Patent 91,200
Less: Accumulated Depreciation <u>11,400 </u> 79,800
Franchise 250,800
Less: Accumulated Depreciation <u>22,800</u> 228,000
