Question

Prepare the December 31 entry for Grouper Corporation to record amortization of intangibles. The trademark has an estimated useful life of 4 years with a residual value of $3.520. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry for the account titles and enter for the amounts.) Account Tities and Explanation Debit Credit 1 On July 1, 2020, Grouper Corporation purchased Young Company by paying $253,500 cash and issuing a $139,000 note payable to Steve Young. At July 1, 2020, the balance sheet of Young Company was as follows. Cash $208,000 $50,900. Accounts payable 90,600 Stockholders' equity Accounts receivable 243,400 Inventory 110,000 $451.400 Land 41.800 Buildings (net) 75,700 Equipment (net) 71,400 Trademarks 11.000 $451,400 The recorded amounts all approximate current values except for land (fair value of $64.300), inventory fair value of $127.000), and trademarks (fair value of $16,880).

Answer 1

The entry to record the amortization of Grouper Corporation's trademark is a debit to Amortization Expense for $1,670 and a credit to Accumulated Amortization - Trademarks for $1,670, reflecting 6 months of amortization.

Step-by-step explanation:

To record the amortization of intangibles for Grouper Corporation at December 31, we must calculate the annual amortization expense of the trademark which has been valued at $16,880 with an estimated useful life of 4 years and a residual value of $3,520. The annual amortization expense is calculated by subtracting the residual value from the fair value and dividing by the useful life. The calculation is as follows: ($16,880 - $3,520) ÷ 4 = $3,340 per year. Since the trademark was purchased on July 1, 2020, we need to account for 6 months of amortization for the year ending December 31, which is $3,340 ÷ 2 = $1,670.

The journal entry to record the amortization of the trademark at December 31 will be:

Debit Amortization Expense $1,670

Credit Accumulated Amortization - Trademarks $1,670

This entry reflects the semi-annual amortization of the trademark's value for the second half of the year.