Log out Go to App
Go to App

Learning Materials

Features

Discover

Chapter 12: Q12-11BE (page 638)

Question: R. Wilson Corporation commenced operations in early 2017. The corporation incurred \(60,000 of costs such as fees to underwriters, legal fees, state fees, and promotional expenditures during its formation. Prepare journal entries to record the \)60,000 expenditure and 2017 amortization, if any.

Short Answer

Expert verified

Answer

Debited organization expense by $60,000 and credited cash account by the same amount

Step by step solution

01

Organization Expense

The first cost of forming a corporation is referred to as an organizational cost or charge. Legal and advertising fees to establish the corporation with the state and federal governments are common organizational charges.

02

Journal Entry

Date

Particulars

JF

Debit

Credit

Organization Expense

$60,000

Cash

$60,000

(Being organization expenses paid)

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

Hiram Co. uses the equity method to account for investments in common stock. What accounting should be made for dividends received from these investments subsequent to the date of investment?

What is the nature of research and development costs?

: As a new intern for the local branch office of a national brokerage firm, you are excited to get an assignment that allows you to use your accounting expertise. Your supervisor provides you with the spreadsheet below, which contains data for the most recent quarter for three companies that the firm has been recommending to its clients as “buys.” Each of the companies’ returns on assets has outperformed their industry cohorts in the past. But, given recent challenges in their markets, there is concern that the companies may experience operating challenges and lower earnings. (All numbers in millions, except return on assets.)

A

B

C

D

E

Company

Fair Value of Company

Book Value (Net Assets)

Carrying Value of Goodwill

Return on Assets

Sprint Nextel

\(36,361

\)51,271

$30,718

3.5%

Washington Mutual

11,742

23,941

9,062

2.4

E* Trade Financial

1,639

4,104

2,035

5.6

Instructions

  1. The fair value for each of these companies is lower than the corresponding book value. What implications does this have for each company’s future prospects?
  2. To date, none of these companies has recorded goodwill impairments. Your supervisor suspects that they will need to record impairments in the near future, but he is unsure about the goodwill impairment rules. Is it likely that these companies will recognize impairments? Explain.
  3. Estimate the amount of goodwill impairment for each company and prepare the journal entry to record the impairment. For each company, you may assume that the book value less the carrying value of the goodwill approximates the fair value of the company’s net assets.
  4. Discuss the effects of your entries in part (c) on your evaluation of these companies based on the return on assets ratio.

If intangibles are acquired for stock, how is the cost of the intangible determined?

Question: As the recently appointed auditor for Bryan Corporation, you have been asked to examine selected accounts before the 6-month financial statements of June 30, 2017, are prepared. The controller for Bryan Corporation mentions that only one account is kept for intangible assets. The account is shown below.

Intangible assets

Debit

Credit

Balance

Jan. 4

Research and development costs

940,000

940,000

Jan. 5

Legal costs to obtain patent

75,000

1,015,000

Jan. 31

Payment of 7 months’ rent on property leased by Bryan

91,000

1,106,000

Feb. 11

Premium on common stock

250,000

856,000

March 31

Unamortized bond discount on bonds due March 31, 2037

84,000

940,000

April 30

Promotional expenses related to start-up of business

207,000

1,147,000

June 30

Operating losses for first 6 months

241,000

1,388,000

Instructions

Prepare the entry or entries necessary to correct this account. Assume that the patent has a useful life of 10 years.
See all solutions

Recommended explanations on Business Studies Textbooks

Change Management

Read Explanation

Strategic Direction

Read Explanation

Corporate Finance

Read Explanation

Strategic Analysis

Read Explanation

Financial Performance

Read Explanation

Business Development

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.

Sign-up for free