P9-31A Accounting for intangibles [20-25min]
Midland Telecom provides communication service in Iowa, Nebraska, the Dakotas, and Montana. Midland purchases goodwill as part of the acquisition of Shipley Wireless Company, which had the following.
Book value of assets |
750,000 |
Market Value of assets |
1,000,000 |
Liabilities |
530,000 |
Requirements:
1. Journalize the entry to record Midland’s purchase of Shipley Wireless for $ 320,000 cash plus a $480,000 note payable.
2. What special asset does Midland’s acquisition of Shipley Wireless identify? How should Midland Telecom account for this asset after acquiring Shipley Wireless? Explain in detail.