142.The Bugs Company purchased the Daffy Company in January of 2013. Daffy's balance sheet included $350,000 of assets, $125,000 of liabilities and equity of $225,000. Bugs agrees to assume the...

142.The Bugs Company purchased the Daffy Company in January of 2013. Daffy's balance sheet included $350,000 of assets, $125,000 of liabilities and equity of $225,000. Bugs agrees to assume the liabilities and pay $240,000 to purchase Daffy. An independent appraiser assessed the fair market value of Daffy's assets to be $315,000. Indicate whether each of the following statements about this transaction is true or false.


_____ a) Bugs' entry to record the transaction includes a debit to the assets for $350,000.
_____ b) Bugs' entry to record the transaction includes a credit to liabilities for $125,000.
_____ c) Bugs will recognize $50,000 of goodwill in recording the purchase of Daffy.
_____ d) It is impossible for Bugs to estimate the length of life for goodwill.

_____ e) The goodwill will be amortized in the same manner as patents.

143.Indicate whether each of the following statements is true or false.


_____ a) A patent with a useful life of 5 years and a legal life of 10 years is amortized over 10 years.
_____ b) Intangible assets with indefinite useful lives must be tested each year for impairment.
_____ c) If it is determined that the original value recorded for goodwill is too high, then an entry is made directly to Retained Earnings, reducing the balance in this account.
_____ d) The entry to recognize an impairment loss on goodwill includes a debit to Impairment Loss and a credit to Goodwill.
_____ e) The recognition of an impairment loss involves a cash outflow classified as a financing activity.