ABC Manufacturing Corp. (a public company) decided to expand further by purchasing the net assets of XYZ Manufacturing Corp for $3 million cash. XYZ’s statement of financial position at December 31, 2020 follows. XYZ Corp Statement of Financial Position December 31, 2020 Assets Liabilities and Equities Cash........................................... $ 210,000 Accounts payable................... $ 325,000 Receivables................................ 450,000 Common shares..................... 800,000 Inventory................................... 275,000 Retained earnings................... 835,000 Plant assets (net)........................ 1,025,000 Total assets................................ $ 1,960,000 Total equities......................... $ 1,960,000 An appraisal, agreed to by both parties, indicated that the fair value of the inventory was $ 320,000 and the fair value of the plant assets (net) was $ 1,225,000. The fair value of the receivables and payables is equal to the amount reported on the balance sheet. In addition, there was an internally developed patent not recognized in the accounts of XYZ and which has a fair value of $30,000. Required: Prepare ABC Corp.’s entry to record the purchase of XYZ Corp.’s net assets. List all assets and liabilities acquired.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter13: Investments And Long-term Receivables

Section: Chapter Questions

Problem 2MC: During 2021, Anthony Company purchased debt securities as a long-term investment and classified them...

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ABC Manufacturing Corp. (a public company) decided to expand further by purchasing the net assets of XYZ Manufacturing Corp for $3 million cash. XYZ’s statement of financial position at December 31, 2020 follows. XYZ Corp Statement of Financial Position December 31, 2020 Assets Liabilities and Equities Cash........................................... $ 210,000 Accounts payable................... $ 325,000 Receivables................................ 450,000 Common shares..................... 800,000 Inventory................................... 275,000 Retained earnings................... 835,000 Plant assets (net)........................ 1,025,000 Total assets................................ $ 1,960,000 Total equities......................... $ 1,960,000 An appraisal, agreed to by both parties, indicated that the fair value of the inventory was $ 320,000 and the fair value of the plant assets (net) was $ 1,225,000. The fair value of the receivables and payables is equal to the amount reported on the balance sheet. In addition, there was an internally developed patent not recognized in the accounts of XYZ and which has a fair value of $30,000. Required: Prepare ABC Corp.’s entry to record the purchase of XYZ Corp.’s net assets. List all assets and liabilities acquired.

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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