11(b) Flashcards
The intangible asset goodwill may be
Capitalized only when purchased
Central Company bought General Products Division in 2025 and recorded $750,000 of goodwill related to the purchase. On December 31, 2026, the fair value of General Products Division is $4,200,000 and it is carried in Central’s books for $5,100,000 including the goodwill. What amount of goodwill impairment should be recognized by General Products in 2026?
$900,000
Dennis Company purchases Miles Company for $4,200,000 cash on January 1, 2026. The book value of Miles Company’s net assets reported on its December 31, 2025 financial statement was $3,600,000. Analysis indicated that the fair value of Miles’s intangible assets exceeded the book value by $600,000, and the fair value of intangible assets exceeded the book value by $320,000. What amount of gain or goodwill is recognized by Dennis?
$320,000 gain
In 2025, Waggoner Corp incurred research and development costs as follows:
Material and equipment $160,000
Personnel 190,000
Indirect costs 200,000
These costs relate to a product that will be marketed in 2026. It is estimated that these costs recouped by December 31, 2028. The equipment has no alternative future use. What is the amount of research and development costs that should be expensed in 2025?
$550,000
Hall Co., which uses straight-line depreciation and amortization, incurred research costs as follows:
Materials used in research and development projects $950,00
Equipment acquired that will have alternative uses in the future research and development projects (no salvage) 3,000,000
Depreciation for 2026 on the above equipment 500,000
Personnel costs of persons involved in research and development projects 750,000
Consulting fees paid to outsiders for research and development projects 300,000
Indirect costs reasonably allocable to research and development projects 225,000
The amount of research and development costs charged to expense in Hall’s 2026 income statement should be
$2,725,000
Tuff company acquired Ranger Company for $48,200,000 cash on August 1, 2026. The fair value of Ranger Company’s identifiable tangible and intangible net assets was $41,000,000. Tuff will amortize any goodwill over the maximum number of years allowed. What is the annual amortization if goodwill for this acquisition?
$0
Blue Sky Company’s 12/31/26 balance sheet reports assets of $7,000,000 and liabilities of $2,800,000. All of Blue Sky’s assets’ book values approximate their fair value, except for land, which has a fair value that is $420,000 greater that it’s book value. On 12/31/26, Horace Wimp Corporation paid $7,140,000 to acquire Blue Sky. What amount of goodwill should Horace Wimp record as a result of this purchase?
$2,520,000
Floyd Company purchases Haegwr Company for $2,400,000 cash on January 1, 2026. The book value of Haeger Company’s net assets, as reflected on its December 31, 2025 balance sheet is $1,860,000. An analysis by Floyd on December 31, 2025 indicates that the fair value of Haeger’s tangible assets exceeded the book value by $180,000, and the fair value of identifiable tangible assets exceeded the book value by $135,000. How much goodwill should be recognized by Floyd Company when recording the purchase of Haeger Company?
$225,000
MaBelle Corporation, which uses straight-line depreciation and amortization, incurred the following costs in 2026:
Costs of R&D equipment with a useful life of 4 years in R&D projects (no salvage) $800,000
Start-up costs incurred when opening a new plant 140,000
Advertising expense to introduce a new product 700,000
Engineering costs incurred to advance a product to full production stage 600,000
What amount should MaBelle report as research and development expense in 2026?
$800,000
Research and development costs consists of
Planned search or critical investigation aimed at the discovery of new knowledge
The costs or organizing a corporation include legal fees, fees paid to the state if incorporation, feeds paid to promoters, and the costs of meetings for organizing promoters. These costs are said to benefit the corporation for the entity’s entire life. The costs should be
Expensed as incurred
General Products Company bought Special Products Division in 2025 and recorded $750,000 of goodwill related to the purchase. On December 31, 2026, the fair value of the Special Products Division is $6,000,000 and it is carried on General Product’s books for a total of $5,100,000, including the goodwill. What goodwill impairment should be recognized by General products in 2026?
$0
Twilight Corporation acquired EOW Products on January 1, 2025 for $6,400,000, and recorded goodwill of $1,200,000 as a result of that purchase. At December 31, 2026 the EOW Products Devision had a fair value of $5,440,000. The net identifiable assets of the Division (including goodwill) had a carrying value of $5,740,000 at that time. What amount of loss on impairment of goodwill should Twilight report in 2026?
$300,000
Dennis Company purchases Miles Company for $5,000,000 cash on January 1, 2026. The book value of Miles Company’s net assets reported on its December 31, 2924 financial statement was $3,600,000. Analysis indicated that the fair value of Miles’s tangible assets exceeded the book value by $320,000. What is the fair value of the net assets used to calculate goodwill?
$4,520,000
