Alonzo CoAcquires 3 Patents from Shaq Corp

question 86

Multiple Choice

Alonzo Co.acquires 3 patents from Shaq Corp.for a total of $360,000.The patents were carried on Shaq's books as follows: Patent AA: $5,000; Patent BB: $2,000; and Patent CC: $3,000.When Alonzo acquired the patents their fair values were: Patent AA: $20,000; Patent BB: $240,000; and Patent CC: $60,000.At what amount should Alonzo record Patent BB?

• A)$120,000
• B)$240,000
• C)$2,000
• D)$270,000

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Definitions:

Liability Account

A liability account records debts or obligations a company owes to others, appearing on the balance sheet.

Owner's Equity Account

An account on a company's balance sheet representing the owner's total interest in the business, after subtracting liabilities from assets.

Transaction

An agreement or communication carried out between two or more parties that results in the exchange of goods, services, or money.

Credits

Credits refer to a bookkeeping entry that increases a liability or equity account, or reduces an asset or expense account, reflecting the opposite side of a debit.