ACC 221 1st Edition Lecture 24 Outline of Previous Lecture- Section 23: Asset Depreciation Depreciationo Overview Straight Line Depreciationo Allocates evenly over time Double Declining Balance Methodo Front Loadedo Depreciation Factoro Adjusting Entry Activity Based Depreciationo Depreciation based on Activity Removing Assetso No gain or losso Gain on saleo Loss on saleOutline of Current Lecture - Section 24: Goodwill Goodwillo What is goodwill?o Calculating goodwillo Day of acquisitiono No goodwillo Goodwill into accounting systemCurrent Lecture- Section 24: Asset Goodwill Goodwillo What is goodwill? Intangible asset, help to make a company more valuable by adding a variety ofaspects: - Brand recognition- Logo- ReputationThese 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.- Customer loyalty- Trained employees- Location Hard Assets – physical assets (cash, accounts receivable, inventory, equipment) that make up the tangible value of a companyo 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 sheeto 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 purchaseo 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 thiso 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 goodwillo If you expect less goodwill, take an impairment loss and remove from
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