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Problem Chapter 1
p1-1
Pin San
Current assets $ 520,000 $ 240,000
Land $ 200,000 $ 400,000
Buildings-net $ 1,200,000 $ 400,000
Equipment-net $ 880,000 $ 960,000
Total assets $ 2,800,000 $ 2,000,000
Current Liabilities $ 200,000 $ 240,000
Capital stock, 10$ par $ 2,000,000 $ 800,000
Additional paid-in capital $ 200,000 $ 560,000
Retained earnings $ 400,000 $ 400,000
Total equities $ 2,800,000 $ 2,000,000
On January 2, 2011, Pin issues 60,000 shares of its stock with a market value of $40 per share for all
the outstanding shares of San Corporation in an acquisition. San is dissolved. The recorded book values
reflect fair values, except for the buildings of Pin, which have a fair value of $1,600,000, and the current
assets of San, which have a fair value of $400,000.
Jawaban :
Preliminary computations
Fair Value: Cost of investment in San at January 2
Book value of net assets
Excess fair value over book value
Pin Corporation
Balance Sheet at January 2, 2011
Assets
Current assets
Land
Buildings-net
Equipment-net
Goodwil
Total assets
p1-2
Prepare balance sheet after an acquisition
On January 2, 2011, Pet Corporation enters into a business combination with Sea Corporation in which
Sea is dissolved. Pet pays $1,650,000 for Sea, the consideration consisting of 66,000 shares of Pet $10
par common stock with a market value of $25 per share. In addition, Pet pays the following expenses in
cash at the time of the merger:
Finders' fee
Accounting and legal fees
Registration and issuance costs of securities
Balance sheet and fair value information for the two companies on December 31, 2010, immediately
before the merger, is as follows :
Pet Book Value
Cash $ 300,000
Accounts receivable-net $ 460,000
Inventories $ 1,040,000
Land $ 800,000
Buildings-net $ 2,000,000
Equipment-net $ 1,000,000
Total assets $ 5,600,000
Accounts payable $ 600,000
Note payable $ 1,200,000
Capital stock, $10 par $ 1,600,000
Other paid-in capital $ 1,200,000
Retained earnings $ 1,000,000
Total liabilities and owners' equity' $ 5,600,000
REQUIRED: Prepare a balance sheet for Pet Corporation as of January 2, 2011, immediately after the merger,
assuming the merger is treated as an acquisition.
jawaban
Pet Corporation
Balance Sheet
at January 2, 2011
Assets
Current assets
Cash $ 80,000
Accounts receivable-net $ 540,000
Inventories $ 1,280,000
Plant assets
Land $ 1,100,000
Buildings-net $ 2,600,000
Equipment-net $ 1,500,000
Goodwill $ 310,000
Total Assets $ 7,410,000
Stockholders' equity
Capital stock, $10 par $ 2,260,000
Other paid-in capital $ 2,110,000
Retained earnings $ 800,000
Total liabilities and stocholders' equity $ 7,410,000
p1-4
Journal entries and balance sheet for an acquisition
On Jan. 2017, Pat Corporation paid $5,000,000 for Saw Corporations voting common stock and Saw was
dissolved. The purchase price consisted of 100,000 shares of Pats common stock with a market value of
$4,000,000, plus $1,000,000 cash. In addition, Pat paid $100,000 for registering and issuing the 100,000
shares of common stock and $200,000 for other costs of combination. Balance sheet information for the
companies immediately before the acquisition is summarized as follows:
Pat Saw
Book Value Book Value
Cash $ 6,000,000 $ 480,000
Account Receivable-net $ 2,600,000 $ 720,000
Notes receivable-net $ 3,000,000 $ 600,000
Inventories $ 5,000,000 $ 840,000
Other current assets $ 1,400,000 $ 360,000
Land $ 4,000,000 $ 200,000
Building-net $ 18,000,000 $ 1,200,000
Equipment-net $ 20,000,000 $ 1,600,000
Total assets $ 60,000,000 $ 6,000,000
Accounts Payable $ 2,000,000 $ 600,000
Mortgage payable-10% $ 10,000,000 $ 1,400,000
Capital stock, $10 par $ 20,000,000 $ 2,000,000
Paid-in Capital $ 16,000,000 $ 1,200,000
Retained earnings $ 12,000,000 $ 800,000
Total liabilities & equities $ 60,000,000 $ 6,000,000
REQUIRED
1. Prepare journal entries for Pat Corporation to record its acquisition of Saw Corporation, including all
allocations to individual asset and liability accounts.
2. Prepare a balance sheet for Pat Corporation on January 2, 2011, immediately after the acquisition and
dissolution of Saw.
Par pays the following expenses in connection with the business combination:
Costs of registering and issuing securities $100,000
Other direct costs of combination $200,000
$300,000
Cash $ 480,000
Account receivable $ 720,000
Note receivable $ 600,000
Invetories $ 1,000,000
Other current assets $ 400,000
Land $ 400,000
Buildings $ 2,400,000
Equipment $ 1,200,000
Accounts payable $ 600,000
Mortgage payable, 10% $ 1,200,000
Investment in Saw $ 5,000,000
Gain on Bargain purchase $200,000
$ 2,400,000
$ 1,760,000
$ 640,000
$ 160,000
$ 480,000
$ 640,000
$ 760,000
$ 600,000
$ 1,600,000
$ 1,840,000
$ 480,000
$ 5,280,000
$ 440,000
$ 2,600,000
$ 1,940,000
$ 300,000
$ 5,280,000
poration in which
hares of Pet $10 Preliminary computations
owing expenses in Pet pays $1,650,000
par $10
$70,000
$130,000 Fair Value : Cost of acquiring Sea
$80,000 Fair Value of assets acquired and liabilities assumed
$280,000 Goodwill from acquisition of Sea
10, immediately
Saw
Fair Value
$ 480,000
$ 720,000
$ 600,000
$ 1,000,000
$ 400,000
$ 400,000
$ 2,400,000
$ 1,200,000
$ 7,200,000
$ 600,000
$ 1,200,000
$1,000,000
2 Pat Corporation
Balance Sheet
at January 2, 2011
(after business combination)
Assets:
Current Assets
Cash
Accounts receivable-net
Notes receivable-net
Inventories
Other current assets
Plant Assets
Land
Buildings-net
Equipment-net
Total assets
Liabilities and Stockholders Equity
Liabilities
Accounts payable
Mortgage payable, 10%
Stockholders Equity
Capital stock, $10 par
Other paid-in capital
Retained earnings
Total liabilities and stockholders equity
market value $ 40
Shares 66000
Market value $25
$ 4,400,000
$ 20,400,000
$ 21,200,000 $ 46,000,000
$ 65,900,000
$ 2,600,000
$ 11,200,000 $ 13,800,000
$ 21,000,000
$ 18,900,000
$ 12,200,000 $ 52,100,000
$ 65,900,000