Prepare the journal entry to record the acquisition

Obssuth Company is trading in its old computer system for an ERP system. The old system is on the books at a cost of $1,270,000 with accumulated depreciation of $885,000. The ERP has a price of $4,500,000 installed and debugged, but the manufacturer has agreed to reduce this amount by $250,000 in return for Obssuth’s old system.

Prepare the journal entry to record the acquisition of the new ERP system.

On July 1, Nutt Company exchanged a warehouse and some land for 50,000 shares of Zesco Corporation stock. The stock was selling for $12 per share, and a recent appraisal of the land and warehouse set their total value at $650,000. The warehouse and land originally cost $450,000 and $225,000, respectively. Accumulated depreciation on the warehouse was $320,000.

Prepare the entry to record the exchange. What value did you assign to the stock acquired in the transaction? Why?

Kaltenheuser Corporation owns a patent with a 17-year legal life and a eight-year useful life. The patent cost $40,000. What is the amortization expense each year if Kaltenheuser uses the straightline method?

Solution: