Reference no: EM133078107

Questions -

Q1. On 10/1/19, Michael paid $40,000 for a customer list. He incurred legal fees of $4,000 and filing expenses of $6,000 to obtain this customer list. Michael plans to use this list over the next 10 years. At the end of its useful life, he will be able to sell it for $2,000 to colleges for enrollment.

a. How much would Michael amortize this Customer List for in 2020?

b. How much would Michael amortize this Customer List for in 2021?

c. During 2021, Michael determined that he would only receive future cash flows and a fair value of $40,000 for owning this customer list. With that said, is Michael's list impaired? If so, how much?

Q2. On 12/1/19, Henry wants to review some trading options for his car. First, here is some information about his old car:

Purchase Price on 1/1/19: $800,000

Accumulated Depre up to date: $240,000

Fair Value on 12/1/20 : $675,000

a. For Car #1, Henry could purchase it for $50,000 cash paid plus trade in his old car. The new car #1 has a fair value of $600,000. The old and new cars would be different. What would the journal entry be for this trade?

b. For car #2, Henry could purchase it for $64,000 cash paid plus trade in his old car. The new car #2 has a fair value of $644,000. The old and new cars would be similar. What would the journal entry be for this trade?