Question

The statement of financial position of Delacosta Corporation as of December 31, 2014, is as follows:
Note 1: Buildings are stated at cost, except for one building that was recorded at its appraised value as management determined the building to be worth more than originally paid at acquisition. The excess of the appraisal value over cost was $570,000. Depreciation has been recorded based on cost.
Note 2: Goodwill in the amount of $70,000 was recognized because the company believed that the carrying amount of assets was not an accurate representation of the company's fair value. The gain of $70,000 was credited to Retained Earnings.
Note 3: Notes payable are long-term except for the current installment due of $100,000.
Note 4: Investments-trading are fair value- net income investments and have a fair value of $75,000. Investments in shares (fair value through OCI) have a fair value of $200,000. Both investments are currently recorded at cost.
Instructions
(a) Prepare a corrected classified statement of financial position in good form. The notes above are for information only. Assume that you have decided not to use the revaluation model for property, plant, and equipment.
(b) From the perspective of a user of Delacosta's statement of financial position, discuss the importance of proper accounting of goodwill.


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  • CreatedSeptember 18, 2015
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