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    Barkley Company's Patents and loss of impairments

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    1. The following information is available for Barkley Company's patents:

    Cost $1,720,000

    Carrying amount 860,000

    Expected future net cash flows 800,000

    Fair value 640,000

    Barkley would record a loss on impairment of

    A.) $1,080,000.
    B.) $220,000.
    C.) $160,000.
    D.) $60,000.

    2. Blue Sky Company's 12/31/08 balance sheet reports assets of $5,000,000 and liabilities of $2,000,000. All of Blue Sky's assets' book values approximate their fair value, except for land, which has a fair value that is $300,000 greater than its book value. On 12/31/08, Horace Wimp Corporation paid $5,100,000 to acquire Blue Sky. What amount of goodwill should Horace Wimp record as a result of this purchase?
    A.) -0-
    B.) $100,000
    C.) $1,800,000
    D.) $2,100,000

    3. During 2007, Leon Co. incurred the following costs:

    Testing in search for process alternatives $ 350,000

    Costs of marketing research for new product 250,000

    Modification of the formulation of a process 510,000

    Research and development services performed by Beck Corp. for Leon 325,000

    In Leon's 2007 income statement, research and development expense should be

    A.) $510,000.
    B.) $835,000.
    C.) $1,185,000
    D.) $1,435,000.

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    Solution Preview

    1. The following information is available for Barkley Company's patents:
    Cost $1,720,000
    Carrying amount 860,000
    Expected future net cash flows 800,000
    Fair value 640,000

    Barkley would record a loss on impairment of

    B.) $220,000.
    Answer: Impairment Loss = Carrying Amount - Fair value (as fair values is easily ...

    Solution Summary

    This solution shows step-by-step calculations to determine loss of impairment, amount of goodwill, expense value, and research and development expense.

    $2.49

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