Exercise 10–5
Patent ($200,000 + 10,000)…………………………………………. 210,000
……………………………………………………………………..Cash
*The ongoing expense each month of operating as a franchise would be expensed
as incurred.
Exercise 10–6
Calculation of goodwill:
Consideration exchanged $17,000,000
Less fair value of net assets:
Exercise 10–7
Calculation of goodwill:
Consideration exchanged $11,000,000
Less fair value of net assets:
Exercise 10–8
Asset Fair Value
Percent of Total
Fair Value
Initial
Valuation
(Percent ×
$900,000)
Land …………….. $ 300,000 30% $270,000
Exercise 10–9
Requirement 1
Tractor ($5,000 cash + 18,783† present value of note)…………. 23,783
……………………………………………………………………..Cash
………………………………………..Note payable (face amount)
† Present value of note payment:
Requirement 2
Requirement 3
Exercise 10–10
Land:
Purchase price $1,200,000
Building:
Architect’s fees $ 50,000
Equipment:
Total cost of equipment $911,000
Land improvements:
Fork lifts:
Present value of $1: n = 1, i = 7% (from Table 2)
Exercise 10–11
Requirement 1
To record the acquisition of land in exchange for common stock.
February 1, 2018
To record the acquisition of a building through purchase and donation.
November 2, 2018
Building ……………………………………………………………….. 6,000,000
…………………………………………………………………….Cash
Requirement 2
As with U.S. GAAP, the building would be valued at fair value. However, the
amount donated ($2,000,000) would not be recorded as revenue. Instead, IFRS
requires that government grants be recognized in income over the periods
Exercise 10–12
Requirement 1
IFRS requires that government grants be recognized in income over the
periods necessary to match them on a systematic basis with the related costs that
Requirement 2
Alternative 1:
……………………………………………………………..Equipment
Alternative 2:
A correcting entry is necessary to eliminate the revenue recognized and record
deferred income.
…………………………………………………….Deferred income
Exercise 10–13
Requirement 1
($ in thousands)
Net sales ÷ Average PP&E = Fixed-asset turnover ratio
Requirement 2
The fixed-asset turnover ratio indicates the level of sales generated by the
company’s investment in fixed assets. Nvidia is able to generate $9.79 in sales for
every $1 invested in property, plant, and equipment.
Exercise 10–14
Equipment—new ($200,000 + 60,000)…………………………. 260,000
Accumulated depreciation (account balance)………………… 220,000
……………………………………………………………………..Cash
………………………………Equipment—old (account balance)
Exercise 10–15
……………………………………………………………………..Cash
………………………………Equipment—old (account balance)
Exercise 10–16
Requirement 1
Fair value of land + Cash given = Fair value of equipment
Requirement 2
……………………………………………………………………..Cash
……………………………………………………..Land (book value)
Exercise 10–17
Requirement 1
Fair value of land – Cash received = Fair value of equipment
Requirement 2
……………………………………………………..Land (book value)