devry acct305 week 2 homework

Week Two – Homework Exercises E10-5, E10-6 and E10-7, and
E10-26

E10-5 Freitas
Corporation was organized early in 2013. The following expenditures were made
during the first few months of the year:

Attorneys’ fees in connection with the organization of the
corporation $12,000
State filing fees and other incorporation costs
3,000
Purchase of a patent
20,000
Legal and other fees for transfer of the patent
2,000
Purchase of furniture
30,000
Pre-opening salaries
40,000
Total
$107,000

Required: Prepare
a summary journal entry to record the $107,000 in cash expenditures.

E10-6 On March 31,
2013, Wolfson Corporation acquired all of the outstanding common stock of
Barney Corporation for $17,000,000 in cash. The book values and fair values of
Barney’s assets and liabilities were as follows:

Book
Value Fair Value
Current assets
$6,000,000 $7,500,000
Property, plant, and equipment 11,000,000 14,000,000
Other assets 1,000,000 1,500,000
Current liabilities 4,000,000 4,000,000
Long-term liabilities 6,000,000 5,500,000

Required: Calculate
the amount paid for goodwill.

E10-7 Johnson
Corporation acquired all of the outstanding common stock of Smith Corporation
for $11,000,000 in cash. The book value of Smith’s net assets (assets minus
liabilities) was $7,800,000. The fair values of all of Smith’s assets and
liabilities were equal to their book values with the following exceptions:

Book
Value Fair Value
Receivables
$1,300,000 $1,100,000
Property, plant, and equipment 8,000,000 9,400,000
Intangible assets 200,000 1,200,000

Required: Calculate
the amount paid for goodwill.

E10-26 In 2013, Space
Technology Company modified its model Z2 satellite to incorporate a new
communication device. The company made the following expenditures:

Basic research to develop the technology
$2,000,000
Engineering design work 680,000
Development of a prototype device 300,000
Acquisition of equipment 60,000
Testing and modification of the prototype 200,000
Legal and other fees for patent application on the new
communication system 40,000
Legal fees for successful defense of the new patent 20,000
Total
$3,300,000

The equipment will be used on this and other research
projects. Depreciation on the equipment for 2013 is $10,000.

During your year-end review of the accounts related to
intangibles, you discover that the company has capitalized all of the above as
costs of the patents.
Managements contends that the device simply represents an
improvement of the existing communication system of the satellite and,
therefore, should be capitalized.

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