Listed below are five terms followed by a list of phrases that describe or characterize
each of the terms. Match each phrase with the number for the correct term.
On August 1, 2016, Reliable Software began developing a software program to allow
individuals to customize their investment portfolios. Technological feasibility was
established on January 31, 2017, and the program was available for release on March
31, 2017. Development costs were incurred as follows:
Reliable expects a useful life of five years for the software and total revenues of
$8,000,000 during that time. During 2017, revenue of $2,000,000 was recognized.
Required:
1> Prepare the journal entries to record the development costs in 2016 and 2017.
2> Calculate the required amortization for 2017.
Discuss income smoothing as the term relates to pension plans.
Using the chart of accounts provided, indicate by account number the account or
accounts that would be debited and credited in the following transactions and indicate
the type of transaction as: (1) an external transaction, (2) an internal transaction
recorded as an adjusting journal entry, or (3) a closing entry. The company uses a
perpetual inventory system. All prepayments are initially recorded in permanent
accounts.
Declared cash dividends on common stock.
In 2014, Quasar Ltd. acquired all of the common stock of Penlight Laser for $124
million. The fair value of Penlight’s identifiable tangible and intangible assets totaled
$205 million, and the fair value of liabilities assumed by Quasar was $95 million.
Quasar performed a required goodwill impairment test at the end of its fiscal year ended
December 31, 2016. Management has provided the following information:
Required:
1> Determine the amount of goodwill that resulted from the Penlight acquisition.
2> Determine the amount of goodwill impairment loss that Quasar should recognize at
the end of 2016, if any.
3> If an impairment loss is required, prepare the journal entry to record the loss.
