In 2018, Evan Company spent $3,900,000 to acquire 100% of the outstanding stock of Haven Company, i.e., Evan bought Haven. As a result of the acquisition, Evan took over 100% of Haven’s assets AND Even became responsible for 100% of Haven’s liabilities. At the time of the purchase, Haven’s balance sheet reflected the following:   Cash                                                                                                 $   300,000 Accounts receivable, net                                                                1,300,000 Investments                                                                                         900,000 Property, plant, and equipment, net                                             1,100,000 TOTAL ASSETS                                                                          $3,600,000   Accounts payable and accrued liabilities                                 $   750,000 Bonds payable                                                                                  1,250,000 Common stock, $1 par value                                                             60,000 Additional paid-in-capital                                                                 800,000 Retained earnings                                                                               740,000 TOTAL LIABILITIES & SE                                                      $3,600,000   At the time of the purchase, Evan identified the following: The fair value of Haven’s assets equaled their book value EXCEPT FOR the investments and the PP&E. The fair value of the investments was $1,200,000 while the fair value of the PP&E was $1,500,000. The fair value of Haven’s liabilities equaled their book value EXCEPT FOR the bonds payable. The fair value of the bonds payable was $1,200,000. Haven possessed an internally-developed customer list that Evan valued at $60,000. Haven possessed an internally-developed patent that Evan valued at $300,000.   Prepare the entry Evan should make to reflect the purchase of Haven.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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  1.  In 2018, Evan Company spent $3,900,000 to acquire 100% of the outstanding stock of Haven Company, i.e., Evan bought Haven. As a result of the acquisition, Evan took over 100% of Haven’s assets AND Even became responsible for 100% of Haven’s liabilities. At the time of the purchase, Haven’s balance sheet reflected the following:

 

Cash                                                                                                 $   300,000

Accounts receivable, net                                                                1,300,000

Investments                                                                                         900,000

Property, plant, and equipment, net                                             1,100,000

TOTAL ASSETS                                                                          $3,600,000

 

Accounts payable and accrued liabilities                                 $   750,000

Bonds payable                                                                                  1,250,000

Common stock, $1 par value                                                             60,000

Additional paid-in-capital                                                                 800,000

Retained earnings                                                                               740,000

TOTAL LIABILITIES & SE                                                      $3,600,000

 

At the time of the purchase, Evan identified the following:

  1. The fair value of Haven’s assets equaled their book value EXCEPT FOR the investments and the PP&E. The fair value of the investments was $1,200,000 while the fair value of the PP&E was $1,500,000.
  2. The fair value of Haven’s liabilities equaled their book value EXCEPT FOR the bonds payable. The fair value of the bonds payable was $1,200,000.
  3. Haven possessed an internally-developed customer list that Evan valued at $60,000.
  4. Haven possessed an internally-developed patent that Evan valued at $300,000.

 

Prepare the entry Evan should make to reflect the purchase of Haven.

 

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