E12-13B (Accounting for Goodwill) On July 1, 2013, Griffey Corporation purchased Johnson Company by paying $187,500 cash and issuing a $75,000 note payable to Steve Johnson. At July 1, 2013, the balance sheet of Johnson Company was as follows. Cash $ 37,5

E12-13B (Accounting for Goodwill) On July 1, 2013, Griffey Corporation purchased Johnson Company by paying $187,500 cash and issuing a $75,000 note payable to Steve Johnson. At July 1, 2013, the balance sheet of Johnson Company was as follows.

Cash                $ 37,500             Accounts payable        $150,000

Receivables       67,500             Stockholders’ equity        176,250

Inventory            75,000                                                   $326,250

Land                   30,000

Buildings (net)    56,250

Equipment (net)   52,500

Copyrights            7,500

                       $326,250

The recorded amounts all approximate current values except for land (worth $45,000), inventory (worth

$93,750), and copyrights (worth $11,250).

Instructions

(a) Prepare the July 1 entry for Griffey Corporation to record the purchase.

(b) Prepare the December 31 entry for Griffey Corporation to record amortization of intangibles. The

copyrights have an estimated useful life of 4 years with a residual value of $2,250.