(Answered) Horstmeyer transactions- Stiltz stock purchase-Kapono Farms

The Horstmeyer Corporation commenced operations early in 2011. A number of expenditures were made during 2011 that were debited to one account called intangible asset. A recap of the $644,000 balance in this account at the end of 2011 is as follows;Date Transaction Amount;2/3/11 State incorporation fees and legal costs related to organizing the corporation $ 7,000;3/1/11 Fire insurance premium for three-year period 6,000;3/15/11 Purchased a copyright 20,000;4/30/11 Research and development costs 40,000;6/15/11 Legal fees for filing a patent on a new product resulting from an R&Dv project 3,000;9/30/11 Legal fee for successful defense of patent developed above 12,000;10/13/11 Entered into a 1O-year franchise agreement with franchisor 40,000;Various Advertising costs 16,000;11/30/11 Purchase of all of the outstanding common stock of Stiltz Corp. 500,000;Total $644,000;16,000;500,000;$644,000;The total purchase price of the Stiltz Corp. stock was debited to this account. The fair values of Stiltz Corp.'s;assets and liabilities on the date of the purchase were as follows;Receivables $100,000;Equipment 350,000;Patent 150,000;TotaI assets 600,000;Note payable assumed (220,000);Fair value of net assets $ 380,000;Required;Prepare the necessary journal entries to clear the intangible asset account and to set up accounts for separate;intangible assets, other types of assets, and expenses indicated by the transactions. Company, plaintiff, paid $12,000 in legal fees in November, in connection with a successful infringement suit;Case A. Kapono Farms exchanged an old tractor for a newer model. The old tractor had a book value of $12,000;(original cost of $28,000 less accumulated depreciation of $16,000) and a fair value of $9,000. Kapono paid;$20,000 cash to complete the exchange. The exchange has commercial substance.;Required;1. What is the amount of gain or loss that Kapono would recognize on the exchange? What is the initial valur;the new tractor?;2. Repeat requirement 1 assuming that the fair value of the old tractor is $14,000 instead of $9,000.;Case B. Kapono Farms exchanged 100 acres of farmland for similar land. The farmland given had a book value;of $500,000 and a fair value of $700,000. Kapono paid $50,000 cash to complete the exchange. The exchange;has commercial substance.;Required;1. What is the amount of gain or loss that Kapono would recognize on the exchange? What is the initial value of;the new land?;2. Repeat requirement 1 assuming that the fair value of the farmland given is $400,000 instead of $700,000.;3. Repeat requirement 1 assuming that the exchange lacked commercial substance.;Attachments;4-8.docx
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Horstmeyer transactions- Stiltz stock purchase-Kapono Farms

 


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