6. On Jan. 1, 20x1, DIMINUTIVE Co.acquired all of the assets and assumedall of the liabilities of SMALL, Inc. As ofthis date, the carrying amounts and fairvalues of the assets and liabilities ofSMALL acquired by DIMINUTIVE areshown below:AssetsCarrying amounts Fair valuesCash in bank20,00020,000Receivables400,000240,000Allowance for probable losses onreceivables (60,000)Inventory1,040,000700,000Building - net2,000,000Goodwill2,200,000200,00040,000Total assets3,600,0003,200,000Liabilities Payables800,000800,000On the negotiation for the businesscombination, DIMINUTIVE Co. incurredtransaction costs amount P200,000 forlegal, accounting, consultancy fees. IfDIMINUTIVE Co. paid P2,000,000 cashas consideration for the assets andliabilities of SMALL, Inc., how much isthe goodwill (gain on bargain purchase)on the business combination?

Good will or gain on bargain purchase is calculated by deducting Net Assets Acquired from purchase…

Answered: On the negotiation for the business…

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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China Inn and Midwest Chicken exchanged assets. China Inn received delivery equipment and gave restaurant equipment. The fair value and book value of the restaurant equipment were $21,500 and $11,800 (original cost of $44,000 less accumulated depreciation of $32,200), respectively. To equalize market values of the exchanged assets, China Inn paid $8,900 in cash to Midwest Chicken. Record the gain or loss for China Inn on the exchange of the equipment. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.)
Northern purchased the entire business of Southern including all its assets and liabilities for $658,000. Below is information related to the two companies: Northern Southern Fair value of assets $1,044,000 $798,000 Fair value of liabilities 585,000 315,000 Reported assets 813,000 634,000 Reported liabilities 483,000 258,000 Net Income for the year 59,000 58,000 How much goodwill did Northern pay for acquiring Southern?
What accounting entry would you do 50:50 joint operation was commenced between two participants. Mary Company contributed cash of $90 000, and Strickland Company contributed a Building with a fair value of $90 000 and a carrying amount of $75 000. Using the line-by-line method of accounting, Strickland Company would record? DR Building in JO $75 000 CR Building $75 000 DR Building in JO $945000 CR Building $37 500 CR Gain on sale of building $7 500 DR Investment in joint operation $45 000 CR Building $37 500 CR Gain on sale of building $7 500 DR Cash in JO $45 000 DR Building in JO…
Jag and rope Co., merged all the assets and liabilities. The company details as follows, Furniture OMR 40,000 & 50,000. Land OMR 60,000 & 40,000. Building OMR 100,000 & 50,000. Vechicle OMR 20,000 & 10,000 and Account payable OMR 40,000 & 60,000. How much value to get after the amalgamate. Select one: a. OMR 370,000 b. OMR 220,000 c. OMR 270,000 d. OMR 180,000
The owners of a company are planning to sell the business to new interests. The cumulative net earnings for the past 4 years were P6,000,000 including casualty loss of P200,000. The current value of net assets of the company was P16,000,000. Goodwill is determined by capitalizing average earnings at 8%. What is the amount of goodwill? a. P1.450.000 b. P1.550.000 c. P2,215.000 d. P3.375.000
Dynamo Manufacturing paid cash to acquire the assets of an existing company. Among the assets acquired were the following items. Patent with 4 remaining years of legal life $38,600 Goodwill 36,100 Dynamo’s financial condition just prior to the acquisition of these assets is shown in the following statements model. Balance Sheet Income Statement Assets = Liabilities + Stockholders’ Equity Revenue − Expenses = Net Income Statement of Cash Flows Cash + Patent + Goodwill 92,500 + NA + NA = NA + 92,500 NA − NA = NA NA Required Compute the annual amortization expense for these items. Show the acquisition of the intangible assets and the related amortization expense for Year 1 in a horizontal statements model. Prepare the journal entries to record the acquisition of the intangible assets and the related amortization for year 1.
Dynamo Manufacturing paid cash to acquire the assets of an existing company. Among the assets acquired were the following items.Patent with 4 remaining years of legal life $32,200Goodwill 43,700Dynamo’s financial condition just prior to the acquisition of these assets is shown in the following statements model.Balance Sheet Income StatementAssets= Liabilities +Stockholders’Equity Revenue − Expenses = Net IncomeStatementof CashCash Flows + Patent + Goodwill92,000 + NA + NA = NA + 92,000 NA − NA = NA NARequireda. Compute the annual amortization expense for these items.b. Show the acquisition of the intangible assets and the related amortization expense for Year 1 in a horizontal statements model.c. Prepare the journal entries to record the acquisition of the intangible assets and the related amortization for year

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