JO 100 4ll OO D 40)| 4:19 794a95a5-963f-4..0c-9f2dc5edd2da - Saved Edina Company acquir the assets (except cash) and assumed the liabilities of Burns Company on January 1, 2013, paying $2,600,000 cash. Immediately prior to the acquisition, Burns Company's balance sheet was as follows: BOOK VALUE $ 240,000 290,000 960,000 1,020,000 $2,510,000 FAIR VALUE $ 220,000 320,000 1,508,000 1,392,000 $3,440,000 Accounts receivable (net) Inventory Land Buildings (net). Total Accounts payable Note payable Common stock, $5 par Other contributed capital Retained earnings $ 270,000 600,000 420,000 640,000 580,000 $2,510,000 $ 270,000 600,000 Total Edina Company agreed to pay Burns Company's former stockholders $200,000 cash in 2014 if post- combination earnings of the combined company reached $1,000,000 during 2013. Required: A. Prepare the journal entry necessary for Edina Company to record the acquisition on January 1, 2013. It is expected that the earnings target is likely to be met. B. Prepare the journal entry necessary for Edina Company in 2014 assuming the earnings contingency was not met.

JO 100 4ll OO D 40)| 4:19 794a95a5-963f-4..0c-9f2dc5edd2da - Saved Edina Company acquir the assets (except cash) and assumed the liabilities of Burns Company on January 1, 2013, paying $2,600,000 cash. Immediately prior to the acquisition, Burns Company's balance sheet was as follows: BOOK VALUE $ 240,000 290,000 960,000 1,020,000 $2,510,000 FAIR VALUE $ 220,000 320,000 1,508,000 1,392,000 $3,440,000 Accounts receivable (net) Inventory Land Buildings (net). Total Accounts payable Note payable Common stock, $5 par Other contributed capital Retained earnings $ 270,000 600,000 420,000 640,000 580,000 $2,510,000 $ 270,000 600,000 Total Edina Company agreed to pay Burns Company's former stockholders $200,000 cash in 2014 if post- combination earnings of the combined company reached $1,000,000 during 2013. Required: A. Prepare the journal entry necessary for Edina Company to record the acquisition on January 1, 2013. It is expected that the earnings target is likely to be met. B. Prepare the journal entry necessary for Edina Company in 2014 assuming the earnings contingency was not met.

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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