On 12/31, Choco acquired all assets and liabilities of Cake by issuing 40,000 shares of its common stock when the market value (=fair value) is $32/share and this combination is a statutory merger (Cake was dissolved). Choco has common stock with $15 par, 50,000 shares outstanding and Cake has $5 par, 60,000 shares outstanding Choco Book Values Cake Book Values Cake Fair Values Cash and Receivable 350,000 180,000 170,000 Inventories 250,000 100,000 150,000 Land 700,000 120,000 240,000 Building and equipment 600,000 600,000 900,000 Patented technology 100,000 0 60,000 Accounts payable 300,000 120,000 150,000 Long-term debt 0 400,000 350,000 Common stock 750,000 300,000 Additional paid in capital 500,000 60,000 Retained earnings 12/31 450,000 120,000 Revenues 350,000 160,000 Expenses 310,000 130,000 Q4. Prepare fair value allocation and goodwill schedule at the date of the acquisition. Q5. Prepare journal entry for acquisition in Choco’s book. Q6. Choco paid $14,000 in cash for legal fee. What is the journal entry?
Chapter 2.
1. On 12/31, Choco acquired all assets and liabilities of Cake by issuing 40,000 shares of its common stock when the market value (=fair value) is $32/share and this combination is a statutory merger (Cake was dissolved). Choco has common stock with $15 par, 50,000 shares outstanding and Cake has $5 par, 60,000 shares outstanding
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Choco Book Values |
Cake Book Values |
Cake Fair Values |
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Cash and Receivable |
350,000 |
180,000 |
170,000 |
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Inventories |
250,000 |
100,000 |
150,000 |
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Land |
700,000 |
120,000 |
240,000 |
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Building and equipment |
600,000 |
600,000 |
900,000 |
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Patented technology |
100,000 |
0 |
60,000 |
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Accounts payable |
300,000 |
120,000 |
150,000 |
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Long-term debt |
0 |
400,000 |
350,000 |
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Common stock |
750,000 |
300,000 |
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Additional paid in capital |
500,000 |
60,000 |
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450,000 |
120,000 |
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Revenues |
350,000 |
160,000 |
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Expenses |
310,000 |
130,000 |
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Q4. Prepare fair value allocation and
Q5. Prepare
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Q6. Choco paid $14,000 in cash for legal fee. What is the journal entry?
Journal entry refers to the systematic recording of the financial transactions of a company in its accounting books for a particular period of time.
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