Answered: COMBINED CORPORATE ENTITIES AND…

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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Bronze Corporation agrees to acquire the net assets of Wall Corporation on January 1, 20X1. Wall has the following balance sheet on the date of acquisition: Wall Corporation Balance Sheet January 1, 20X1 Assets Liabilities and Equity Accounts receivable . . . . . . . . . $ 79,000 Current liabilities . . . . . . . . . . . . . . $145,000 Inventory . . . . . . . . . . . . . . . . . . 112,000 Bonds payable . . . . . . . . . . . . . . . 100,000 Other current assets . . . . . . . . . . 55,000 Common stock . . . . . . . . . . . . . . . . 200,000 Equipment (net) . . . . . . . . . . . . . 294,000 Paid-in capital in excess of par . . . 50,000 Trademark . . . . . . . . . . . . . . . . . 30,000 Retained earnings . . . . . . . . . . . . . 75,000 Total assets. . . . . . . . . . . . . . . $570,000 Total liabilities and equity . . . . . $570,000 An appraiser determines that in-process R&D exists and has an estimated value of $14,000. The appraisal indicates that the following assets have fair values that differ from their book values: Fair Value Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . $120,000 Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . 307,000 Trademark . . . . . . . . . . . . . . . . . . . . . . . . . . 27,000 Use value analysis to prepare the entry on the books of Bronze Corporation to acquire the net assets of Wall Corporation under each of the following purchase price scenarios: Required 40 Part 1 COMBINED CORPORATE ENTITIES AND CONSOLIDATIONS 1. Purchase price is $500,000. 2. Purchase price is $300,000.

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