I’m studying for my Accounting class and need an explanation.
- (6 points) During 2010, Salem Company spent $1,360,000 in research and development costs. As a result of its R&D activities, Salem patented a new product on September 30, 2010. On September 30, 2010, Salem incurred and paid $42,000 of legal costs related to its new patent. The patent had a five-year legal life. Salem only prepares adjusting journal entries once each year as of 12-31 (year-end).
- Prepare the entries Salem made in 2010 related to the R&D activities and the patent.
- Prepare the entries Salem made in 2011 and 2012 related to the patent.
- On September 1, 2013, Salem spent $12,000 to defend its patent rights. Salem’s defense was successful, protecting the patent’s remaining legal life. Prepare the entries Salem made in 2013 related to the patent.
- (1 point)In 2015, Evan Company spent $250,000 for “goodwill visits” to its key customers. The purpose of the visits was to build on and enhance the solid working-relationship Evan already has with these customers. Prepare the entry Evan should make to reflect the $250,000 he spent.
- (7 points) In 2018, Evan Company spent $3,900,000 to acquire 100% of the outstanding stock of Haven Company, i.e., Evan bought Haven. As a result of the acquisition, Evan took over 100% of Haven’s assets AND Even became responsible for 100% of Haven’s liabilities. At the time of the purchase, Haven’s balance sheet reflected the following:
- The fair value of Haven’s assets equaled their book value EXCEPT FOR the investments and the PP&E. The fair value of the investments was $1,200,000 while the fair value of the PP&E was $1,500,000.
- The fair value of Haven’s liabilities equaled ther book value EXCEPT FOR the bonds payable. The fair value of the bonds payable was $1,200,000.
- Haven possessed an internally-developed customer list that Evan valued at $60,000.
- Haven possessed an internally-developed patent that Evan valued at $300,000.
Accounts receivable, net1,300,000
Property, plant, and equipment, net1,100,000
Accounts payable and accrued liabilities$750,000
Common stock, $1 par value60,000
TOTAL LIABILITIES & SE$3,600,000
At the time of the purchase, Evan identified the following:
Prepare the entry Evan should make to reflect the purchase of Haven.