ACC 221 1st Edition Lecture 24 Outline of Previous Lecture Section 23 Asset Depreciation Depreciation o Overview Straight Line Depreciation o Allocates evenly over time Double Declining Balance Method o Front Loaded o Depreciation Factor o Adjusting Entry Activity Based Depreciation o Depreciation based on Activity Removing Assets o No gain or loss o Gain on sale o Loss on sale Outline of Current Lecture Section 24 Goodwill Goodwill o What is goodwill o Calculating goodwill o Day of acquisition o No goodwill o Goodwill into accounting system Current Lecture Section 24 Asset Goodwill Goodwill o What is goodwill Intangible asset help to make a company more valuable by adding a variety of aspects Brand recognition Logo Reputation These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute o o o o Customer loyalty Trained employees Location Hard Assets physical assets cash accounts receivable inventory equipment that make up the tangible value of a company Calculating goodwill Total value paid physical assets you receive amount of goodwill Goodwill is put onto the asset sheet through acquisitions When purchasing a company or brand your goodwill will reflect the amount received from the purchase which will be reflected on the balance sheet When creating and developing your own brand you will have no goodwill for the company The brand has never been sold and therefore does not show any goodwill on your balance sheet Day of acquisition On this day you must pay for the entire business Eventually you are required to pay off the liabilities section bank and vendors but not necessarily on the day of purchase No goodwill Goodwill will be zero if the amount you pay for the company is equal to the hard assets of the company You cannot have negative goodwill if goodwill appears to be negative other aspects of the assets will adjust to correct this Goodwill into accounting system Dr Cash accounts receivable inventory property equipment and goodwill Cr Accounts payable notes payable and cash Leave goodwill in the assets at end of the year test the goodwill section to see if you still expect to have that amount of goodwill o If you expect less goodwill take an impairment loss and remove from assets
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