Question: A. Tarsel Corp. has been working on software to be sold. Tarsel had spent $1,000,000 developing the software when technological feasibility was established. The company
A.
Tarsel Corp. has been working on software to be sold. Tarsel had spent $1,000,000 developing the software when technological feasibility was established. The company spent another $600,000 readying the software for sale. The software generated $1,000,000 revenue the first year of its expected four-year life. Tarsel expects to the product to earn an additional $7,000,000 revenue in the future.
Required: Prepare journal entries for the development of the software and the first years amortization.
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B.
Bot, Inc. had the following balance sheet on January 1, Year 1:
| Assets | Liabilities & Equity | ||
| Cash | $ 50,000 | Accounts Payable | $ 25,000 |
| Property, Plant & Equipment | 450,000 | Notes Payable | 260,000 |
| Patents | 15,000 | Stockholders Equity | 230,000 |
|
| $515,000 |
| $515,000 |
On January 2, Year 2, Purchaser, Inc. acquired Bot for $800,000 cash. On that date, Bots property, plant, and equipment had a fair value of $420,000, and its Patents had a fair value of $125,000. In addition, Bot had research and development with an assessed value of $150,000. For all other amounts, the book value of January 1, Year 2, equaled fair value. Compute the goodwill resulting from the purchase of Bot.
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