Compute the amount of goodwill acquired by winans

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Reference no: EM131201388

Brief Exercise 12-2

Celine Dion Corporation purchases a patent from Salmon Company on January 1, 2014, for $54,050. The patent has a remaining legal life of 16 years. Celine Dion feels the patent will be useful for 10 years. Assume that at January 1, 2016, the carrying amount of the patent on Celine Dion's books is $43,240. In January, Celine Dion spends $27,800 successfully defending a patent suit. Celine Dion still feels the patent will be useful until the end of 2023.

Prepare the journal entries to record the $27,800 expenditure and 2016 amortization.

Brief Exercise 12-5

On September 1, 2014, Winans Corporation acquired Aumont Enterprises for a cash payment of $700,130. At the time of purchase, Aumont's balance sheet showed assets of $605,090, liabilities of $199,950, and owners' equity of $405,140. The fair value of Aumont's assets is estimated to be $818,000.

Compute the amount of goodwill acquired by Winans.

Problem 12-2

Fields Laboratories holds a valuable patent (No. 758-6002-1A) on a precipitator that prevents certain types of air pollution. Fields does not manufacture or sell the products and processes it develops. Instead, it conducts research and develops products and processes which it patents, and then assigns the patents to manufacturers on a royalty basis. Occasionally it sells a patent. The history of Fields patent number 758-6002-1A is as follows.

Date	Activity	Cost
2005-2006	Research conducted to develop precipitator	$382,720
Jan. 2007	Design and construction of a prototype	88,080
March2007	Testing of models	56,560
Jan. 2008	Fees paid engineers and lawyers to prepare patent application; patent granted June 30, 2008	87,210
Nov. 2009	Engineering activity necessary to advance the design of the precipitator to the manufacturing stage	82,710
Dec. 2010	Legal fees paid to successfully defend precipitator patent	56,560
April 2011	Research aimed at modifying the design of the patented precipitator	58,180
July 2015	Legal fees paid in unsuccessful patent infringement suit against a competitor	47,780

Fields assumed a useful life of 17 years when it received the initial precipitator patent. On January 1, 2013, it revised its useful life estimate downward to 5 remaining years. Amortization is computed for a full year if the cost is incurred prior to July 1, and no amortization for the year if the cost is incurred after June 30. The company's year ends December 31.

Compute the carrying value of patent No. 758-6002-1A on each of the following dates:

(a) December 31, 2008
(b) December 31, 2012
(c) December 31, 2015.

Reference no: EM131201388

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