Princess has acquired several other companies. Assume that Princess purchased Krandell for $8,000,000 cash. The book value of Krandell's assets is $14,000,000 (market value, $19,000,000), and it has liabilities of $15,000,000(market value, $15,000,000). Requirements 1. Compute the cost of goodwill purchased by Princess. 2. Record the purchase of Krandell by Princess.
Princess has acquired several other companies. Assume that Princess purchased Krandell for $8,000,000 cash. The book value of Krandell's assets is $14,000,000 (market value, $19,000,000), and it has liabilities of $15,000,000(market value, $15,000,000). Requirements 1. Compute the cost of goodwill purchased by Princess. 2. Record the purchase of Krandell by Princess.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Princess has acquired several other companies. Assume that Princess purchased Krandell for $8,000,000 cash. The book value of Krandell's assets is $14,000,000 (market value, $19,000,000), and it has liabilities of $15,000,000(market value, $15,000,000).
Requirements
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1.
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Compute the cost of
Princess.
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2.
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Record the purchase of
Krandell
by
Princess.
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Requirement 1. Compute the cost of goodwill purchased by
Princess.
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Purchase price to acquire Krandell
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Market value of Krandell's assets
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Less: Market value of Krandell's liabilities
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|
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Less: Market value of Krandell's net assets
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Goodwill
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Requirement 2. Record the purchase of Krandellby Princess,
Inc. (Record debits first, then credits. Select the explanation on the last line of thejournal entry table. Check your spelling carefully and do not abbreviate.)
Inc. (Record debits first, then credits. Select the explanation on the last line of the
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