Solution-Purchase of intangible assets in a business

Purchase of intangible assets in a business acquisition

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Reference no: EM13546288

Purchase of Intangible Assets in a Business Acquisition

Cossack Company purchased Village Enterprises. The following fair values were associated with the items acquired in this business acquisition:

	Cost	Fair Value
Accounts receivable	$ 200,000	$ 200,000
Inventory	100,000	50,000
Government contacts	0	100,000
Equipment (net)	40,000	50,000
Short-term loan payable	(200,000)	(200,000)
Net assets	$ 140,000	$ 200,000

The fair value associated with Village Enterprises' government contacts is not based on any legal or contractual relationship. In addition, for obvious reasons, there is no open market trading for intangibles of this sort.

1. Make the journal entry necessary for Cossack Company to record the purchase if the purchase price is $900,000 cash.

2. Assume that the purchase price is $35,000 cash. Make the journal entry necessary to record the purchase.

Reference no: EM13546288

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Purchase of intangible assets in a business acquisition

Reference no: EM13546288

Reference no: EM13546288

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