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.