Asked by Wajahat Jabbar on May 21, 2024
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On 1/1/19, Sey Mold Corporation acquired 100% of DotDot.Com for $2,000,000 cash. On the date of acquisition, DotDot's net book value was $900,000. DotDot's assets included land that was undervalued by $300,000, a building that was undervalued by $400,000, and equipment that was overvalued by $50,000. The building had a remaining useful life of 8 years and the equipment had a remaining useful life of 4 years. Any excess fair value over consideration transferred is allocated to an undervalued patent and is amortized over 5 years.Determine the amortization expense related to the consolidation at the year-end date of 12/31/27.
Amortization Expense
The systematic allocation of the cost of an intangible asset over its useful life.
Fair Value
The proceeds from liquidating an asset or the fees involved in transferring a liability during a regular transaction with engaged market members on the bookkeeping date.
Undervalued Patent
A patent that is recognized at a market value lower than its potential earning power or its replacement cost.
- Explain the accounting treatment for intangible assets, including those with indefinite lives, and their impairment assessments.
- Understand the adjustments necessary in consolidations, including the reevaluation of subsidiary's book values to match fair values, and the consolidation journals associated with these adjustments.
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Learning Objectives
- Explain the accounting treatment for intangible assets, including those with indefinite lives, and their impairment assessments.
- Understand the adjustments necessary in consolidations, including the reevaluation of subsidiary's book values to match fair values, and the consolidation journals associated with these adjustments.
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