During Year 1, Evergreen Corporation had been negotiating to purchase all of Pine Company's noncash assets and to assume all of its liabilities for a single cash price. The target closing date is January 1 of Year 2. Evergreen requested, and was provided, considerable data, including the following midyear balance sheet (summarized). Evergreen also independently estimated fair values of the assets and liabilities for each category provided on the balance sheet of Pine Co. Book Value Balance Sheet, June 30, Year 1 from Pine Co. Assets Cash Accounts receivable* Inventory Property, plant, and equipment* Land Franchise (unamortized balance) Total Liabilities Current liabilities Bonds payable Equity Stockholders' equity Total x Accounts Receivable Account Name Franchise Goodwill $34,200 108,000 252,000 540,000 19,800 36,000 $990,000 Inventory Property, Plant, and Equipment # Land + # + + * Net of the allowance for doubtful accounts and accumulated depreciation, respectively. **Cash will not be purchased by Evergreen Corporation. Required $72,000 360,000 558,000 $990,000 a. Compute the amount of goodwill recorded by Evergreen Corporation for this purchase assuming that Pine Company is created as a new segment of Evergreen, that all goodwill is assigned to that segment, and the purchase price is $480,600. Goodwill: $0 Fair Value Developed by Evergreen Corp. b. Provide the entry for Evergreen Corporation to record the purchase of Pine Company. Current Liabilities Bonds Payable Cash + To record purchase of Pine Company. $0** 104,400 162,000 513,000 72,000 37,800 $889,200 $66,600 360,000 Dr. 0 0 0 0 0 0 0 0 0 Cr. 0x 0x 0x 0x 0x 0x 0x 0x 34,200 x c. Provide the entry (if any) at the end of Year 2 to adjust goodwill for impairment assuming the following information. •Note: If a journal entry isn't required on any of the dates shown, select "N/A-debit" and "N/A-credit" as the account names and leave the Dr. and Cr. answers blank (zero).
During Year 1, Evergreen Corporation had been negotiating to purchase all of Pine Company's noncash assets and to assume all of its liabilities for a single cash price. The target closing date is January 1 of Year 2. Evergreen requested, and was provided, considerable data, including the following midyear balance sheet (summarized). Evergreen also independently estimated fair values of the assets and liabilities for each category provided on the balance sheet of Pine Co. Book Value Balance Sheet, June 30, Year 1 from Pine Co. Assets Cash Accounts receivable* Inventory Property, plant, and equipment* Land Franchise (unamortized balance) Total Liabilities Current liabilities Bonds payable Equity Stockholders' equity Total x Accounts Receivable Account Name Franchise Goodwill $34,200 108,000 252,000 540,000 19,800 36,000 $990,000 Inventory Property, Plant, and Equipment # Land + # + + * Net of the allowance for doubtful accounts and accumulated depreciation, respectively. **Cash will not be purchased by Evergreen Corporation. Required $72,000 360,000 558,000 $990,000 a. Compute the amount of goodwill recorded by Evergreen Corporation for this purchase assuming that Pine Company is created as a new segment of Evergreen, that all goodwill is assigned to that segment, and the purchase price is $480,600. Goodwill: $0 Fair Value Developed by Evergreen Corp. b. Provide the entry for Evergreen Corporation to record the purchase of Pine Company. Current Liabilities Bonds Payable Cash + To record purchase of Pine Company. $0** 104,400 162,000 513,000 72,000 37,800 $889,200 $66,600 360,000 Dr. 0 0 0 0 0 0 0 0 0 Cr. 0x 0x 0x 0x 0x 0x 0x 0x 34,200 x c. Provide the entry (if any) at the end of Year 2 to adjust goodwill for impairment assuming the following information. •Note: If a journal entry isn't required on any of the dates shown, select "N/A-debit" and "N/A-credit" as the account names and leave the Dr. and Cr. answers blank (zero).
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:During Year 1, Evergreen Corporation had been negotiating to purchase all of Pine Company's noncash assets and to assume all of its liabilities for a single cash price. The target closing
date is January 1 of Year 2. Evergreen requested, and was provided, considerable data, including the following midyear balance sheet (summarized). Evergreen also independently
estimated fair values of the assets and liabilities for each category provided on the balance sheet of Pine Co.
Book Value
Balance Sheet, June 30, Year 1 from Pine Co.
Assets
Cash
Accounts receivable*
Inventory
Property, plant, and equipment*
Land
Franchise (unamortized balance)
Total
Liabilities
Current liabilities
Bonds payable
Equity
Stockholders' equity
Total
Required
x
Accounts Receivable
* Net of the allowance for doubtful accounts and accumulated depreciation, respectively.
**Cash will not be purchased by Evergreen Corporation.
Account Name
Franchise
Goodwill
Inventory
Property, Plant, and Equipment
Land
a. Compute the amount of goodwill recorded by Evergreen Corporation for this purchase assuming that Pine Company is created as a new segment of Evergreen, that all goodwill is
assigned to that segment, and the purchase price is $480,600.
Goodwill: $0
$34,200
108,000
252,000
540,000
19,800
36,000
$990,000
558,000
$990,000
$72,000
360,000
b. Provide the entry for Evergreen Corporation to record the purchase of Pine Company.
+
+
+
+
#
Current Liabilities
Bonds Payable
Cash
To record purchase of Pine Company.
+
Fair Value
Developed by
Evergreen Corp.
$0**
104,400
162,000
513,000
72,000
37,800
$889,200
$66,600
360,000
Dr.
0
0
0
0
0
0
0
0
0
Cr.
0x
0x
0x
0x
0x
0x
0x
0x
34,200 x
c. Provide the entry (if any) at the end of Year 2 to adjust goodwill for impairment assuming the following information.
•Note: If a journal entry isn't required on any of the dates shown, select "N/A-debit" and "N/A-credit" as the account names and leave the Dr. and Cr. answers blank (zero).
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