The balance sheet of National Company on December 31, 2020, with related current fair value data, was as follows: National Company Balance Sheet (prior to business combination) December 31, 2020 Carrying Amounts Current Fair Values Assets Current assets $180,000 640,000 $ 220,000 700,000 Plant assets (net) Intangible assets (net) (All recognizable under generally accepted accounting principles for business combinations.) Total assets Liabilities and Stockholders' Equity Current liabilities 80,000 $900,000 90,000 $1,010,000 $ 80,000 200,000 $280,000 $400,000 220,000 $620,000 $900,000 Long-term debt Total liabilities $ 80,000 190,000 $ 270,000 Common stock, no par or stated value Retained earnings Total stockholders' equity Total liabilities and stockholders’ equity On December 31, 2020, United Corporation issued $200,000 common stock, $2 par value ($3 fair value) and paid $188,120, for all the net assets of National. Out of pocket costs paid by united, totaled $40,000, for legal fees to effect the business combination. Instructions: Prepare journal entries on December 31, 2020, to record United Corporation's acquisition of the net assets of National Company. Show the computation of goodwill in the explanation of the relevant journal entry. (Disregard income taxes.)
The balance sheet of National Company on December 31, 2020, with related current fair value data, was as follows: National Company Balance Sheet (prior to business combination) December 31, 2020 Carrying Amounts Current Fair Values Assets Current assets $180,000 640,000 $ 220,000 700,000 Plant assets (net) Intangible assets (net) (All recognizable under generally accepted accounting principles for business combinations.) Total assets Liabilities and Stockholders' Equity Current liabilities 80,000 $900,000 90,000 $1,010,000 $ 80,000 200,000 $280,000 $400,000 220,000 $620,000 $900,000 Long-term debt Total liabilities $ 80,000 190,000 $ 270,000 Common stock, no par or stated value Retained earnings Total stockholders' equity Total liabilities and stockholders’ equity On December 31, 2020, United Corporation issued $200,000 common stock, $2 par value ($3 fair value) and paid $188,120, for all the net assets of National. Out of pocket costs paid by united, totaled $40,000, for legal fees to effect the business combination. Instructions: Prepare journal entries on December 31, 2020, to record United Corporation's acquisition of the net assets of National Company. Show the computation of goodwill in the explanation of the relevant journal entry. (Disregard income taxes.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:The balance sheet of National Company on December 31, 2020, with related current
fair value data, was as follows:
National Company
Balance Sheet (prior to business combination)
December 31, 2020
Carrying
Amounts
Current
Fair Values
Assets
Current assets
$180,000
640,000
$ 220,000
700,000
Plant assets (net)
Intangible assets (net) (All recognizable under
generally accepted accounting principles for
business combinations.)
Total assets
Liabilities and Stockholders' Equity
Current liabilities
80,000
$900,000
90,000
$1,010,000
$ 80,000
190,000
$ 270,000
$ 80,000
200,000
$280,000
$400,000
220,000
$620,000
$900,000
Long-term debt
Total liabilities
Common stock, no par or stated value
Retained earnings
Total stockholders’ equity
Total liabilities and stockholders’ equity
On December 31, 2020, United Corporation issued $200,000 common stock, $2 par
value ($3 fair value) and paid $188,120, for all the net assets of National. Out of
pocket costs paid by united, totaled $40,000, for legal fees to effect the business
combination.
Instructions:
Prepare journal entries on December 31, 2020, to record United Corporation's
acquisition of the net assets of National Company. Show the computation of goodwill
in the explanation of the relevant journal entry. (Disregard income taxes.)
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