Internet Corporation is considering the acquisition of Homepage Corporation and has obtained the following audited condensed balance sheet:Internet and Homepage agree on a price of $280,000 for Homepage's net assets. Prepare the necessary journal entry to record the purchase given the following:Internet issues its $5 par value stock as consideration. The fair value of the stock at the acquisition date is $50 per share. Additionally, Internet incurs $5,000 of security issuance costs. Balance SheetDecember 31, 2016AssetsLiabilities and Equity$ 40,00020,00080,000Current assetsCurrent Liabilities$ 60,000LandCapital Stock (50,000shares, $1 par value)Other Paid-in CapitalRetained EarningsBuildings (net)Equipment (net)50,00020,00070,000$200,00060,000$200,000Internet also acquired the following fair values for Homepage's assets and liabilities:$ 55,00060,00090,00075,000Current assetsLandBuildings (net)Equipment (net)Current Liabilities(60,000)$220,000

calculation of purchase consideration Given, shareholders are to be paid $5 per stock Number of…

Answered: Internet Corporation is considering the…

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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Internet Corporation is considering the acquisition of Homepage Corporation and has obtained the following audited condensed balance sheet:

Internet and Homepage agree on a price of $280,000 for Homepage's net assets. Prepare the necessary journal entry to record the purchase given the following:

Internet issues its $5 par value stock as consideration. The fair value of the stock at the acquisition date is $50 per share. Additionally, Internet incurs $5,000 of security issuance costs.

Balance Sheet
December 31, 2016
Assets
Liabilities and Equity
$ 40,000
20,000
80,000
Current assets
Current Liabilities
$ 60,000
Land
Capital Stock (50,000
shares, $1 par value)
Other Paid-in Capital
Retained Earnings
Buildings (net)
Equipment (net)
50,000
20,000
70,000
$200,000
60,000
$200,000
Internet also acquired the following fair values for Homepage's assets and liabilities:
$ 55,000
60,000
90,000
75,000
Current assets
Land
Buildings (net)
Equipment (net)
Current Liabilities
(60,000)
$220,000

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