Accounting Equation : The assets, liabilities and equity relation is known as the accounting equation. Assets are the resources of company and that increase as business expand whereas liabilities are the burden on company that has to pay in future; Equity means the owner claim on assets. An accounting equation represent the assets of the company are equal to the liabilities and equity of the company. In can be represented as follow: Assets = Liabilities + Equity Assets: Assets are the resources that a company needs to run the business. An asset is economic resources of the company. Liabilities: Liabilities are generally the amount owned by the company from lenders, suppliers, or bank. Liabilities are the burden on the company that they have to pay to others. Equity: The Company needs finance to run the business. Equity is one of the method through which the company raise the capital. To Identify: The effect of transactions on the accounting equation.

Question

On May 31, 2026, Oriole Company paid $3,290,000 to acquire all of the common stock of Pharoah Corporation, which became a division of Oriole. Pharoah reported the following balance sheet at the time of the acquisition: Current assets $846,000 Current liabilities $564,000 Noncurrent assets 2,538,000 Long-term liabilities 470,000 Stockholder's equity 2,350,000 Total assets $3,384,000 Total liabilities and stockholder's equity $3,384,000 It was determined at the date of the purchase that the fair value of the identifiable net assets of Pharoah was $2,914,000. At December 31, 2026, Pharoah reports the following balance sheet information: Current assets $752,000 Noncurrent assets (including goodwill recognized in purchase) 2,256,000 Current liabilities (658,000) Long-term liabilities (470,000) Net assets $1,880,000 It is determined that the fair value of the Pharoah division is $2,068,000.

Answer 1

Question

Chapter 1, Problem 12E

To determine

Accounting Equation:

The assets, liabilities and equity relation is known as the accounting equation. Assets are the resources of company and that increase as business expand whereas liabilities are the burden on company that has to pay in future; Equity means the owner claim on assets. An accounting equation represent the assets of the company are equal to the liabilities and equity of the company.

In can be represented as follow:

Assets=Liabilities+Equity

Assets:

Assets are the resources that a company needs to run the business. An asset is economic resources of the company.

Liabilities:

Liabilities are generally the amount owned by the company from lenders, suppliers, or bank. Liabilities are the burden on the company that they have to pay to others.

Equity:

The Company needs finance to run the business. Equity is one of the method through which the company raise the capital.

To Identify: The effect of transactions on the accounting equation.

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On May 31, 2026, Oriole Company paid $3,290,000 to acquire all of the common stock of Pharoah Corporation, which became a division of Oriole. Pharoah reported the following balance sheet at the time of the acquisition: Current assets $846,000 Current liabilities $564,000 Noncurrent assets 2,538,000 Long-term liabilities 470,000 Stockholder's equity 2,350,000 Total assets $3,384,000 Total liabilities and stockholder's equity $3,384,000 It was determined at the date of the purchase that the fair value of the identifiable net assets of Pharoah was $2,914,000. At December 31, 2026, Pharoah reports the following balance sheet information: Current assets $752,000 Noncurrent assets (including goodwill recognized in purchase) 2,256,000 Current liabilities (658,000) Long-term liabilities (470,000) Net assets $1,880,000 It is determined that the fair value of the Pharoah division is $2,068,000.

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