Berton Company reported assets totaling $870,000 as of December 31, 2012. The fo

Question

Berton Company reported assets totaling $870,000 as of December 31, 2012. The following information relates to those assets:

(a) Breakstone Labs, a rival company, recently offered to give a $100,000 signing bonus to the head of Berton's fabrication department if she would leave Berton and join Breakstone. She declined. Berton has consequently recorded a long-term asset, "Employees Under Contract," for $100,000.

(b) Berton purchased a patent from a small research firm for $75,000. Subsequent research has shown that the patented technology doesn't work as well as originally thought and the technology actually has no economic use and should be written off as an expense. Berton reports the patent at its original cost of $60,000.

After considering the items above, what should be added or subtracted to the total of Berton's reported assets?

Organize your answer as follows: $870,000 a. + or - b. + or –

What is the adjusted assets value after a and b? ____________

Explanation / Answer

870,000 a. + b.-

a. Berton has recorded long terms assets (intangible assets) means total value of assets increased.

b. $ 75,000 being the purchase price must be written off. So assets Value decreased.

Adjusted Assets Value = 870,000 + 100,000 - 75,000 = $895,000.

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