The Ripkin Corporation was organized and began to operate on January 1, 2014, to manufacture and sell
Question:
The Ripkin Corporation was organized and began to operate on January 1, 2014, to manufacture and sell children's clothes. During 2014, the following expenditures were recorded in the company's goodwill account by an inexperienced data-entry clerk:
Goodwill | ||
2014 | | |
January 2 | Corporate registration legal fees | $ 5,000 |
January 2 | Underwriter's fee for the issuance of common stock | 7,500 |
January 2 | Discount on bond issue | 40,000 |
January 2 | Cost of a major advertising campaign to promote the company's name and merchandise | 75,000 |
January 14 | Cost of employee training program | 25,000 |
January 14 | Excess of purchase price over market value of Mannekin's net identifiable assets paid in acquiring Mannekin Corporation | 150,000 |
January 14 | Cost of a patent purchased from a competitor with an expected life of ten years | 25,000 |
July 1 | Operating loss for first six months | 45,000 |
July 1 | Legal fees for the successful defense of patent acquired Jan. 14 | 10,000 |
December 20 | Cost of Christmas party | 12,000 |
| Total | $394,500 |
Required:
a. Prepare an entry as of December 31, 2014, to reclassify the items from the goodwill account to the appropriate accounts.
b. Prepare the adjusting entry or entries required to amortize the intangible assets using the straight-line method. Calculate amortization to the nearest month.
Financial Reporting and Analysis
ISBN: 978-0078025679
6th edition
Authors: Flawrence Revsine, Daniel Collins, Bruce, Mittelstaedt, Leon