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Current assets.. Land Buildings and equipment. Loans payable Fair Value $ 250,000 800,000 1,000,000 (300,000) The Pratt Company pays $3,000,000 for Sontag Corporation, and records the acquisition as a merger. Pratt Company determines that identifiable intangibles valued at $1,500,000, not previously reported on

Current assets.. Land Buildings and equipment. Loans payable Fair Value $ 250,000 800,000 1,000,000 (300,000) The Pratt Company pays $3,000,000 for Sontag Corporation, and records the acquisition as a merger. Pratt Company determines that identifiable intangibles valued at $1,500,000, not previously reported on

FINANCIAL ACCOUNTING
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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E2.5 Bargain Purchase Sontag Corporation's net assets have fair values as described below. Current assets... Land Buildings and equipment Loans payable Fair Value $ 250,000 800,000 1,000,000 (300,000) The Pratt Company pays $3,000,000 for Sontag Corporation, and records the acquisition as a merger. Pratt Company determines that identifiable intangibles valued at $1,500,000, not previously reported on Sontag's books, also are recognized as acquired assets. Required a. Prepare a schedule to calculate the gain on acquisition. b. Prepare Pratt's journal entry to record the merger. C. Now assume Pratt determines that Sontag Corporation has unreported contingent liabilities, report- able at the date of acquisition following GAAP, with a fair value of $75,000. Recalculate the gain on acquisition.
Transcribed Image Text:E2.5 Bargain Purchase Sontag Corporation's net assets have fair values as described below. Current assets... Land Buildings and equipment Loans payable Fair Value $ 250,000 800,000 1,000,000 (300,000) The Pratt Company pays $3,000,000 for Sontag Corporation, and records the acquisition as a merger. Pratt Company determines that identifiable intangibles valued at $1,500,000, not previously reported on Sontag's books, also are recognized as acquired assets. Required a. Prepare a schedule to calculate the gain on acquisition. b. Prepare Pratt's journal entry to record the merger. C. Now assume Pratt determines that Sontag Corporation has unreported contingent liabilities, report- able at the date of acquisition following GAAP, with a fair value of $75,000. Recalculate the gain on acquisition.
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