Furtastic manufactures imitation fur garments. On June 1, 2016, Furtastic made a

Question

Furtastic manufactures imitation fur garments. On June 1, 2016, Furtastic made a sale to Willett's Department Store under terms that require Willett to pay $150,000 to Furtastic on June 30, 2016. In a separate transaction on June 15, 2016, Furtastic purchased brand advertising services from Willett for $12,000. The fair value of those advertising services is $5,000. Furtastic expects that 3% of all sales will prove uncollectible. Prepare the journal entries to record the transactions above. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Explanation / Answer

As the brand advertising has been purchased over the fair value of $5000, the company has paid goodwill to acquire the same. Hence, the excess amount of $7000 has to be assigned to Goodwill Account.

The journal entry to record the purchase of brand advertising should be prepared as follows:

Related Questions

Navigate

• Browse (All)
• Browse F
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.