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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.

##### Solution Summary

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

##### 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 ...

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