The Robinson Company purchased the Franklin Company at a price of $3,840,000. The fair market value of the net assets purchased equals $2,700,000.

1. What is the amount of goodwill recorded by Robinson as of the date of purchase?
2. Does Robinson amortize goodwill at the end of the year?
3. Robinson believes his employees provide superior customer service, and through his efforts, Robinson believes he has created $1,510,000 of goodwill. Should the Robinson Company record this goodwill?

2.

Below are selected accounts from Gregor Co.'s adjusted trial balance for the year ended December 31. Prepare a classified balance sheet. Note: On the company's balance sheet, accumulated depreciation is subtracted from Equipment, accumulated amortization is subtracted from Patents, and accumulated depletion is subtracted from Silver mine.

full equity	ps	67,000			Accounts payable	ps	3,700
patents		7,400			Accumulated Depreciation—Equipment		28,300
Money		7,700			Notes payable (due in 9 years)		28,000
Tierra		47,000			Goodwill		6,700
Equipment		37,000			Cumulative Depletion: Silver Mine		6,400
Payment mine		32,000			Accumulated Amortization—Patents		4.400

3.

Lok Co. reports net sales of $4,126,000 for Year 2 and $7,656,000 for Year 3. Year-end balances for total assets are Year 1, $1,587,000; Year 2, $1,848,000; and Year 3, $1,971,000.

(1) Calculate Lok's total asset turnover for year 2 and year 3.

(2) Lok's competitor has a total asset turnover of 3.0 during year 3. Is Lok performing better or worse than its competitor based on total asset turnover?

• Worse

• Better

4.

Gilly Construction trades in an old tractor for a new tractor, receives an exchange allowance of $21,500, and pays the remaining $64,500 in cash. The old tractor had cost $107,000 and had accumulated depreciation of $58,125. Answer the following questions assuming the trade-in has commercial substance.

1. What is the book value of the old tractor at the time of the exchange?
2. What is the loss on this asset swap?
3. How much should be recorded (debited) in the asset account for the new tractor?

Answer rating: 100% (QA)

1 The amount of goodwill recorded by Robinson as of the date of purchase is found by subtracting the fair market value of the net assets purchased fro... View the full answer