Podcast
Questions and Answers
What percentage of the lump-sum price was allocated to the building in the acquisition of the manufacturing facility?
What percentage of the lump-sum price was allocated to the building in the acquisition of the manufacturing facility?
- 25%
- 50%
- 45% (correct)
- 30%
Which of the following correctly calculates the amount assigned to land improvements after the acquisition?
Which of the following correctly calculates the amount assigned to land improvements after the acquisition?
- $10,000,000
- $9,000,000
- $8,000,000 (correct)
- $7,500,000
If the total fair value of the acquired assets is $40,000,000, what lump-sum price was paid for the manufacturing facility?
If the total fair value of the acquired assets is $40,000,000, what lump-sum price was paid for the manufacturing facility?
- $34,000,000
- $32,000,000 (correct)
- $30,000,000
- $28,000,000
In the provided example, what is the fair value of the land relative to the total fair values?
In the provided example, what is the fair value of the land relative to the total fair values?
Which of the following is NOT a method to acquire assets without paying cash at the time of purchase?
Which of the following is NOT a method to acquire assets without paying cash at the time of purchase?
What value represents the total investment in the land after the lump-sum purchase?
What value represents the total investment in the land after the lump-sum purchase?
How is the allocated value of the land determined in the context of asset acquisition?
How is the allocated value of the land determined in the context of asset acquisition?
What amount is assigned to the building in the acquisition of the manufacturing facility?
What amount is assigned to the building in the acquisition of the manufacturing facility?
What is the face amount of the noninterest-bearing note that Dennison, Inc. signed?
What is the face amount of the noninterest-bearing note that Dennison, Inc. signed?
What was the total value of intangible assets reported by Microsoft on June 30, 2020?
What was the total value of intangible assets reported by Microsoft on June 30, 2020?
What was the cash price negotiated for the equipment purchased by Dennison, Inc.?
What was the cash price negotiated for the equipment purchased by Dennison, Inc.?
What is the discount amount recorded by Dennison, Inc. on the note payable?
What is the discount amount recorded by Dennison, Inc. on the note payable?
Which category of intangible assets saw a decrease from 2019 to 2020?
Which category of intangible assets saw a decrease from 2019 to 2020?
What was the value of customer-related intangible assets for Microsoft on June 30, 2019?
What was the value of customer-related intangible assets for Microsoft on June 30, 2019?
What factor was used to determine the present value of the equipment purchased by Dennison, Inc.?
What factor was used to determine the present value of the equipment purchased by Dennison, Inc.?
How much did contract-based intangible assets decline from 2019 to 2020?
How much did contract-based intangible assets decline from 2019 to 2020?
What is the implied interest rate used in the present value calculation for Dennison's note?
What is the implied interest rate used in the present value calculation for Dennison's note?
Which of the following values corresponds to technology-based intangible assets on June 30, 2020?
Which of the following values corresponds to technology-based intangible assets on June 30, 2020?
When will Dennison, Inc. make the payment of the note?
When will Dennison, Inc. make the payment of the note?
What is the total value of the equipment equivalent to in cash, as indicated by the price list for Edgar, Inc.?
What is the total value of the equipment equivalent to in cash, as indicated by the price list for Edgar, Inc.?
What is the maturity date for the note signed by Edgar, Inc.?
What is the maturity date for the note signed by Edgar, Inc.?
What is the total cost of the equipment that Symington Corporation will record?
What is the total cost of the equipment that Symington Corporation will record?
Which of the following costs associated with land should NOT be included in its total value?
Which of the following costs associated with land should NOT be included in its total value?
Which of the following expenditures can reduce the cost of land?
Which of the following expenditures can reduce the cost of land?
What kind of costs are included in the calculation of the total cost of equipment?
What kind of costs are included in the calculation of the total cost of equipment?
What is NOT a relevant cost when determining the total cost of acquiring land?
What is NOT a relevant cost when determining the total cost of acquiring land?
Which of the following expenses is directly associated with the purchase of equipment?
Which of the following expenses is directly associated with the purchase of equipment?
Which cost is NOT explicitly listed as part of the expenditures for equipment?
Which cost is NOT explicitly listed as part of the expenditures for equipment?
Which of the following is included in determining the recorded amount for the cost of equipment?
Which of the following is included in determining the recorded amount for the cost of equipment?
What price did Edgar record the asset on January 2?
What price did Edgar record the asset on January 2?
In a noncash transaction, which value serves as the best evidence of the exchange value?
In a noncash transaction, which value serves as the best evidence of the exchange value?
When does the issuance of equity securities typically occur for small companies?
When does the issuance of equity securities typically occur for small companies?
What is the exchange value determined by when issuing equity securities?
What is the exchange value determined by when issuing equity securities?
How many shares did Elcorn Company issue in exchange for land on March 31, 2024?
How many shares did Elcorn Company issue in exchange for land on March 31, 2024?
What was the fair value per share of the common stock issued by Elcorn Company?
What was the fair value per share of the common stock issued by Elcorn Company?
In what scenario would the fair value of a noncash asset acquired be more readily available?
In what scenario would the fair value of a noncash asset acquired be more readily available?
Why might the fair value of an acquired asset serve as the best evidence in a transaction?
Why might the fair value of an acquired asset serve as the best evidence in a transaction?
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Study Notes
Microsoft Corporation Intangible Assets
- Microsoft Corporation's intangible assets are all finite-lived.
- In 2020, Microsoft had $7,038 million in intangible assets.
- Microsoft’s intangible assets are broken down into four categories: technology-based, customer-related, marketing-related, and contract-based.
- In 2020, the largest component of intangible assets was customer-related, at $2,647 million.
- Microsoft’s intangible assets decreased slightly from 2019 to 2020, from $7,750 million to $7,038 million.
Cost of Equipment
- Symington Corporation purchased new equipment for $48,000.
- Symington Corporation incurs additional costs associated with the equipment including transportation costs, installation and special wiring, and testing.
- The total cost of the equipment for Symington Corporation is $57,900.
Cost of Land
- Land costs include the purchase price, attorney fees, real estate agent commissions, title and title search costs, recording fees, back taxes, liens, mortgages or other obligations.
- Current portion of property taxes are not included in the cost of land.
- Costs related to clearing, filling, draining and even removing old buildings after purchase reduce the cost of the land.
- Proceeds from the sale of salvaged materials after purchase reduce the cost of the land.
Lump-Sum Purchases
- Cirrus Corporation purchased a manufacturing facility on five acres of land for $32,000,000.
- The fair values of the building, land and the land improvements are $18,000,000, $12,000,000 and $10,000,000 respectively.
- The initial values of the building, land and land improvements are $14,400,000, $9,600,000 and $8,000,000 respectively.
Noncash Acquisitions
- Companies can acquire assets without paying cash at the time of the purchase.
- Companies can acquire assets through deferred payments, issuance of equity securities, donated assets, or other noncash forms.
Noninterest-Bearing Notes
- Dennison, Inc. purchased equipment and signed a non-interest-bearing note.
- The note requires Dennison to pay $100,000 on December 31, 2026.
- Dennison knows the cash price of the equipment is $79,383.
- The discount on the note payable is $20,617.
Deferred Payments
- Edgar, Inc. purchased equipment and signed a noninterest-bearing note.
- Edgar records the asset at the fair value of $120,000.
Issuance of Equity Securities
- Small companies may issue equity securities in exchange for assets.
- The exchange value is either the fair value of the assets received by the corporation or the market value of the shares issued.
Asset Acquired by Issuing Equity Securities
- Elcorn Company issued 10,000 shares of its no-par common stock in exchange for land.
- The market price per share was $20.
- The total value of the shares issued was $200,000.
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