Chapter_02_XLSol - Student Name: Instructor Class:...

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Student Name: Instructor Class: McGraw-Hill/Irwin Problem 02-14 Part a. Marshall and Tucker Consolidated Balances Marshall's acquisition of Tucker represents a bargain purchase because the fair value of the net assets acquired exceeds the fair value of the consideration transaction as follows: Fair value of consideration transferred $400,000 Fair value of net assets acquired 515,000 Gain on bargain purchase $115,000 Correct! Record 3 transactions that occurred to create the business combination: MARSHALL COMPANY General Journal Account Debit Credit Investment in Tucker 515,000 Long-Term Liabilities 200,000 Common Stock (par value) 20,000 Additional Paid-In Capital 180,000 Gain on Bargain Purchase 115,000 (To record liabilities and stock isued for Tucker acquilition at fair value) Combination Expenses 30,000 Cash 30,000 (To record payment of combination fees) Additional Paid-In Capital 12,000 Cash 12,000 (To record payment of stock issuance costs) Marshall's trial balance is adjusted for the transactions (as shown in the worksheet that follows). Consideration transferred at fair value $400,000 Book value (assets minus liabilities 460,000 or stockholders' equity) Book value in excess of consideration (60,000) Allocation to specific accounts based on fair value: Inventory 5,000 Land 20,000 Buildings 30,000 Bargain purchase (fair market value $(115,000) in excess of purchase price) Correct!
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Instructor Class: McGraw-Hill/Irwin Problem 02-14 Account Name Balance Explanation Cash 38,000 Add the two book values less acquisition costs. Receivables 360,000 Add the two book values. Inventory 505,000 Add the two book values, plus the fair value adjustment. Land 400,000 Add the two book values, plus the fair value adjustment. Buildings 670,000 Add the two book values, plus the fair value adjustment. Equipment 210,000 Add the two book values Total Assets 2,183,000 Summation of the above individual figures. Accounts Payable 190,000 Add the two book values. Long-term Liabilities 830,000 Add the two book values plus the debt incurred by the parent in acquiring the subsidiary. Common Stock 130,000 The parent's book value after stock issue to acquire the subsidiary. Additional Paid-In Capital 528,000 The parent's book value after the stock issue to acquire the subsidiary less the stock issue costs. Retained Earnings 505,000 Parent company balance less $30,000 in combination expenses plus $115,000 gain on bargain purchase.
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Chapter_02_XLSol - Student Name: Instructor Class:...

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