On June 30, 2016, Epstein completed the acquisition of the Johnstone Corporation

Question

On June 30, 2016, Epstein completed the acquisition of the Johnstone Corporation for $1,520,000 in cash. The fair value of the net identifiable assets of Johnstone was $1,300,000.

Included in the assets purchased from Johnstone was a patent that was valued at $67,200. The remaining legal life of the patent was 13 years, but Epstein believes that the patent will only be useful for another eight years.

Epstein acquired a franchise on October 1, 2016, by paying an initial franchise fee of $168,000. The contractual life of the franchise is 10 years.

Prepare year-end adjusting journal entries to record amortization expense on the intangibles at December 31, 2016

On June 30, 2016, Epstein completed the acquisition of the Johnstone Corporation for $1,520,000 in cash. The fair value of the net identifiable assets of Johnstone was $1,300,000.

Included in the assets purchased from Johnstone was a patent that was valued at $67,200. The remaining legal life of the patent was 13 years, but Epstein believes that the patent will only be useful for another eight years.

Epstein acquired a franchise on October 1, 2016, by paying an initial franchise fee of $168,000. The contractual life of the franchise is 10 years.

Explanation / Answer

Consideration exchanged 15,20,000 Less: Fair value of net identifiable assets 13,00,000 goodwill 2,20,000 DR CR The cost of goodwill is not amortized Amortization expense 67200/8*6/12 4200 Patent 4200 Amortization expense 168000/10 *3/12 4200 Franchise 4200

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