On 1/1/21 Pinn Corporation acquired all of Simm Corporation’s common stock by issuing #250,000 shares of $1 par value common stock with a current market value of $10,000,000. Related legal fees were $300,000 and were paid in cash. The book value and fair values of Simm’s accounts are given below: Book Value DR (CR)Fair Value DR (CR)Current Assets1,900,0001,900,000Plant Assets1,100,0001,200,000Current Liabilities(1,000,000)(1,000,000)Long Term Liabilities(500,000)(475,000)Common Stock(800,000) Retained Earnings(700,000) In addition, Simm has a previously unrecorded identifiable Intangible Asset with a fair value of $500,000.Required:Prepare the entry on Pinn’s books to record the acquisitionPrepare the working paper eliminating entries to consolidate the balance sheets of Pinn Corporation and Simm Corporation at the date of acquisition.

Journal entries are the initial recording of all the monetary business transactions in a systematic…

Answered: 1,900,000 Plant Assets 1,100,000…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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On 1/1/21 Pinn Corporation acquired all of Simm Corporation’s common stock by issuing #250,000 shares of $1 par value common stock with a current market value of $10,000,000. Related legal fees were $300,000 and were paid in cash. The book value and fair values of Simm’s accounts are given below:

	Book Value DR (CR)	Fair Value DR (CR)
Current Assets	1,900,000	1,900,000
Plant Assets	1,100,000	1,200,000
Current Liabilities	(1,000,000)	(1,000,000)
Long Term Liabilities	(500,000)	(475,000)
Common Stock	(800,000)
Retained Earnings	(700,000)

In addition, Simm has a previously unrecorded identifiable Intangible Asset with a fair value of $500,000.

Required:

Prepare the entry on Pinn’s books to record the acquisition
Prepare the working paper eliminating entries to consolidate the balance sheets of Pinn Corporation and Simm Corporation at the date of acquisition.

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