On January 1st, 2014, Lop Inc. completed the 100% acquisitions of GatorHead Inc. The total...
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On January 1st, 2014, Lop Inc. completed the 100% acquisitions of GatorHead Inc. The total purchase price Lop paid for this acquisition was $13 billion. The book value and fair value of GatorHead Inc. on the date of purchase were as follows ($ in billions):
Book Value Fair Value
Current assets 10 20
Non-current assets 20 40
Liabilities 14 50
Question 1: Determine the amount of goodwill that should be recorded from the GatorHead acquisition, if any. Show your work.
During 2014, Lop Inc. also spent $170,000 in research and development costs. As a result, a new product called the GH was patented. The patent was obtained on October 1, 2014, and had a legal life of 20 years and a useful life of 10 years. Legal costs of $18,000 (filing fees) related to the patent were incurred as of October 1, 2014.
Question 2: Prepare all journal entries required in 2014 as a result of the patent-related transactions and information above. Show your work.
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