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1. DG Company acquired all of the outstanding common stock of AB Company for $76,000,000. The book values and fair values of AB Company assets and liabilities are as follows:

	Book Value	Fair Value
Current assets	$30,000,000	$28,000,000
Property, plant and equipment	29,000,000	49,000,000
Other assets	4,500,000	$ 6,500,000
Current liabilities	3,500,000	3,500,000
Long-term liabilities	6,500,000	9,000,000

The amount DG Company records as goodwill is:

		$5,000,000
		$73,500,000
		$9,500,000
		$2,500,000
	QMG purchases a new machine and makes the following expenditures in the current period.

Purchase price of machine	$ 72,000
Sales tax	5,200
Shipment of machine	1,230
Shipping insurance for machine	130
Installation of the machine	1,300
Utility bill for the first month of use	730
Insurance on the machine for the first year	330
Yearly routine maintenance	1,250
Repair costs for a broken fan belt on the machine	130
Replace machine motor with a new turbo motor that will last 3 years longer than original motor	9,300
Add a muffler to the machine that makes it run quieter	530

2.QMG should record the cost of the machine at:

		$92,130
		$90,020
		$89,690
		$89,160
	3. COF Company purchases new high tech manufacturing equipment for $106,000 on January 1 of the current year. COF Company estimates a residual value of $13,000 and a five year service life. COF Company uses straight line depreciation.

The book value at the end of year 4 is

		$93,000
		$74,400
		$31,600
		$13,000
	4. Sandwich Express acquires franchise rights to market Real Life Hero Sandwiches for $290,000. The franchise agreement is for 10 years. If Sandwich Express uses straight line amortization, the yearly amortization expense is

		$39,000
		$24,000
		$34,000
		$29,000
	5. On January 1 of year 1, SBL Company purchases a patent for $245,000. The remaining legal life of the patent is 20 years but SBL Company estimates the useful life of the patent to be 5 years. On December 31 of the current year, SBL Company pays $59,000 in attorney fees at the end of a successful defense of a patent infringement suit. The useful life of the patent remains the same. SBL Companys year-end is December 31. The amount of amortization expense in year two is

		$63,750
		$73,750
		$43,750
		$53,750
	6. OCP Company purchased a machine on January 1 of year 1 and sells the machine at the end of year 2. OCP Company uses straight-line-depreciation. Other relevant information is

Original cost of the machine	$	70,000
Estimated residual value	$	20,000
Estimated service life		5
Sales price at the end of year 2	$	67,000

The gain or loss on the sale of the machine is:

	$3,000 gain $17,000 loss
	$47,000 loss
	$17,000 gain

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