During the current year, Brewer Company acquired all of the outstanding common stock of Miller Inc. paying $11,900,000 cash. The book values and fair values of Miller's assets and liabilities acquired are listed below: Book Value Fair ValueAccounts receivable$1,750,000 $1,575,000 Inventories 2,600,000 3,900,000 Property, plant, and equipment 8,900,000 11,525,000 Accounts payable 2,900,000 2,900,000 Bonds payable 4,400,000 4,025,000 Prepare the journal entry to record the acquisition by Brewer Company.

Solution: Under the Acquisition method, majority cases of the Buyer or Purchaser are recorded the acquired assets and liabilities at their Fair values. If the the Value of the purchase consideration is more than the net assets of the company, then the goodwill account arises when one company purchases another company. Journal entry is an accounting entry to record every transaction takes place in an organization. It consists of several recordings, each of which is either a debit or a credit. Analysis and Calculation: Journal Entry in the books of Brewer Company: Date Account Name Dr.$ Cr.$ Business purchase Dr. 11,900,000 Liquidator of Miller Inc. Cr. 11,900.000 (being acquisition made from Miller Inc.) Accounts Receivable Dr. 1,575,000 Inventory Dr. 3,900,000 Property, Plant and equipment Dr. 11,525,000 Goodwill Dr. 1,825,000 Accounts Payable Cr. 2,900,000 Bonds Payable Cr. 4,025,000 Business Purchase Cr. 11,900,000 (being Assets and liabilities transferred over net assets of Miller Inc.) Liquidator of Miller Inc. Dr. 11,900,000 Cash Cr. 11,900,000 (Being Payment made to Miller Inc.) Since in the instant case, the purchase consideration is more than the net assets of the Miller Inc. So excess of net assets value is debited to Goodwill account.

Answered: During the current year, Brewer Company…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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During the current year, Brewer Company acquired all of the outstanding common stock of Miller Inc. paying $11,900,000 cash. The book values and fair values of Miller's assets and liabilities acquired are listed below:

	Book Value		Fair Value
Accounts receivable	$	1,750,000		$	1,575,000
Inventories		2,600,000			3,900,000
Property, plant, and equipment		8,900,000			11,525,000
Accounts payable		2,900,000			2,900,000
Bonds payable		4,400,000			4,025,000
Prepare the journal entry to record the acquisition by Brewer Company.

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