Question

On June 28 Lexicon Corporation acquired 100% of the common stock of Gulf & Eastern. The purchase price allocation included the following items: $5.5 million, patent; $4.5 million, developed technology; $3.5 million, inprocess research and development; $6.5 million, goodwill. Lexicon's policy is to amortize intangible assets using the straight-line method, no residual value, and a five-year useful life What is the total amount of expenses (ignoring taxes) that would appear in Lexicon's income statement for the year ended December 31 related to these items? (Enter your answers in whole dollars.) ortization expense in current (partial) Cost Select ear Patent 560,548 5,500,000Amortized Developed technology In-process research and development Goodwill 4,500,000 Amortized 3,500,000 amortized 6,500,000 Amortized 458,630 Not 662,466 1,681,644 Total amortization expense current year *Red text indicates no response was expected in a cell or a formula-based calculation is incorrect; no points deducted.

Answer 1

A	B	C	D	E	F	G	H	I	J
2
3		In-process R&D are accumulated as asset and when the company is acquired, it is written off against earnings.
4		Thus In-process R&D is not amortized.
5
6		Goodwill is generated when companies acquire other companies at price higher than the fair value of assets.
7		As per FASB, goodwill is not allowed to be amortized.
8
9		Patent and Development technology will be amortized.
10		Since purchase has been made on June 28, therefore amortization will occur for next 6 month.
11			Cost	Life	Residual value	Amortization Expense(Full Year)	Amortization Expense(Partial Year)
12		Patent	$5,500,000	5	0	1100000	550000	=G12*(6/12)
13		Developed technology	$4,500,000	5	0	900000	450000	=G13*(6/12)
14
15			Cost	Select	Amortization Expense in current (Partial) Year
16		Patent	$5,500,000	Amortized	550000
17		Developed Technology	$4,500,000	Amortized	450000
18		In-process research and development	$3,500,000	Not Amortized
19		Goodwill	$6,500,000	Amortized
20