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Asistensi

AKL1 Pertemuan 1
Hillary Johnson

Advanced Financial Accounting
Chapter 1

1. Asset Acquisition with Bargain Purchase
Expansionary Co. acquired the net assets of Contractionary Co. on March 1, 2013 for 10,000 common
shares ($10 par value and $30 market value). On February 1, 2013 Expansionary Co. had incurred $10,000
direct cost consummating the acquisition. Contractionary Co. was then dissolved. The balance sheet items
of Contractionary Co. were as follows.


Instructions :
a. Provide journal entries recorded by Expansionary Co. during dates related to the acquisition!
b. Provide journal entries recorded by Contractionary Co. during dates related to the acquisition!

2. Asset Acquisition with Goodwill
Offensive Co. acquired the net assets of Defensive Co. on July 31, 2013 for 10,000 common shares ($1 par
value and $75 market value). On August 31, 2013 Offensive Co. had incurred $20,000 direct cost and
$40.000 stock issuance-related cost consummating the acquisition. Defensive Co. was then dissolved. The
balance sheet items of Defensive Co. were as follows.


As of December 31, 2013, Offensive Co. hired appraisal stating that the fair market value of business units
formerly owned by Defensive Co. was $700,000.
Instructions :
a. Provide journal entries recorded by Offensive Co. during dates related to the acquisition!
b. Provide journal entries recorded by Defensive Co. during dates related to the acquisition!
c. Provide journal entries recorded by Offensive Co. at the year-end!

3. Journal Entries
On January 1, 20X3, PURE Products Corporation issued 12,000 shares of its $10 par value stock to acquire
the net assets of Light Steel Company. Underlying book value and fair value information for the balance
sheet items of Light Steel at the time of acquisition follow:

Balance Sheet Item Book Value Fair Value


Cash $ 60,000 $ 60,000
Accounts Receivable 100,000 100,000
Inventory 60,000 115,000
Land 50,000 70,000
Buildings & Equipment 400,000 350,000
Less: Accumulated Depreciation (150,000) -
Total Assets 520,000 695,000
Accounts Payable 10.000 10,000
Bonds Payable 200,000 180,000
Common Stock ($5 par value) 150,000
Additional Paid-In Capital 70,000
Retained Earnings 90,000
Total Liabilities & Equities 520,000

Light Steel shares were selling at $18 and PURE Products shares were selling at $50 just before the merger
announcement. Additional cash payments made by PURE Products in completing the acquisition were :

Finders fee paid to firm that located Light Steel $10,000


Audit fee for stock issued by PURE Products 3,000
Stock registration fee for new shares of PURE Products 5,000
Legal fees paid to assist in transfer of net assets 9,000
Cost of SEC registration of PURE Products shares 1,000
Instructions :
a. Prepare all journal entries to record the business combination on PURE Products books.