2-16 - 60,000 Building 50,000 Land 20,000 Trademark 30,000...

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16. (Acquisition method entries for a merger) Case 1: Fair value of consideration transferred $145,000 Fair value of net identifiable assets 120,000 Excess to goodwill $25,000 Case 1 entry on Allerton’s books: Current Assets 60,000 Building 50,000 Land 20,000 Trademark 30,000 Goodwill 25,000 Liabilities 40,000 Cash 145,000 Case 2 : Bargain Purchase under acquisition method Fair value of consideration transferred $110,000 Fair value of net identifiable assets 120,000 Gain on bargain purchase $10,000 Case 2 entry on Allerton’s books: Current Assets
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Unformatted text preview: 60,000 Building 50,000 Land 20,000 Trademark 30,000 Gain on bargain purchase 10,000 Liabilities 40,000 Cash 110,000 Problem 16. (continued) In a bargain purchase, the acquisition method employs the fair value of the net identifiable assets acquired as the basis for recording the acquisition. Because this basis exceeds the amount paid, Allerton recognizes a gain on bargain purchase. This is an exception to the general rule of using the fair value of the consideration transferred as the basis for recording the combination....
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This note was uploaded on 10/02/2009 for the course ACCT 401 taught by Professor Ross,m during the Spring '08 term at Western Kentucky University.

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2-16 - 60,000 Building 50,000 Land 20,000 Trademark 30,000...

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