CH2 Solutions

CH2 Solutions - ANSWERS TO EXERCISES Exercise 2-1 Part A...

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ANSWERS TO EXERCISES Exercise 2-1 Part A Receivables 228,000 Inventory 396,000 Plant and Equipment 540,000 Land 660,000 Goodwill ($2,154,000 - $1,824,000) 330,000 Liabilities 594,000 Cash 1,560,00 0 Part B Receivables 228,000 Inventory 396,000 Plant and Equipment 540,000 Land 660,000 Liabilities 594,000 Cash 990,000 Gain on Business Combination ($1,230,000 - $990,000) 240,000 Exercise 2-2 Cash $680,000 Receivables 720,000 Inventories 2,240,000 Plant and Equipment (net) ($3,840,000 + $720,000) 4,560,000 Goodwill 120,000 Total Assets Liabilities 1,520,000 Common Stock, $16 par ($3,440,000 + (.50 × $800,000)) 3,840,000 Other Contributed Capital ($400,000 + $800,000) 1,200,000 Retained Earnings 1,760,000 Total Equities Entries on Petrello Company’s books would be: Cash 200,000 Receivables 240,000 Inventory 240,000 Plant and Equipment 720,000 Goodwill * 120,000 Liabilities 320,000 Common Stock (25,000 × $16) 400,000 Other Contributed Capital ($48 - $16) × 25,000 800,000 * ($48 × 25,000) – [($1,480,000 – ($800,000 – $720,000) – $320,000] 2 - 1
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Exercise 2-3 Accounts Receivable 231,000 Inventory 330,000 Land 550,000 Buildings and Equipment 1,144,000 Goodwill 848,000 Allowance for Uncollectible Accounts ($231,000 - $198,000) 33,000 Current Liabilities 275,000 Bonds Payable 450,000 Premium on Bonds Payable ($495,000 - $450,000) 45,000 Preferred Stock (15,000 × $100) 1,500,000 Common Stock (30,000 × $10) 300,000 Other Contributed Capital ($25 - $10) × 30,000 450,000 Cash 50,000 Cost paid ($1,500,000 + $750,000 + $50,000) = $2,300,000 Fair value of net assets (198,000 + 330,000 + 550,000 + 1,144,000 – 275,000 – 495,000) = 1,452,000 Goodwill = $848,000 Exercise 2-4 Cash 96,000 Receivables 55,200 Inventory 126,000 Land 198,000 Plant and Equipment 466,800 Goodwill* 137,450 Accounts Payable 44,400 Bonds Payable 480,000 Premium on Bonds Payable** 45,050 Cash 510,000 ** Present value of maturity value, 12 periods @ 4%: 0.6246 × $480,000 = $299,808 Present value of interest annuity, 12 periods @ 4%: 9.38507 × $24,000 = 225,242 Total present value 525,050 Par value 480,000 Premium on bonds payable $ 45,050 *Cash paid $510,000 Less: Book value of net assets acquired ($897,600 – $44,400 – $480,000) (373,200 ) Excess of cash paid over book value 136,800 Increase in inventory to fair value (15,600) Increase in land to fair value (28,800) Increase in bond to fair value 45,050
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This note was uploaded on 07/31/2011 for the course ACCT 401 taught by Professor Bennett during the Spring '08 term at Strayer.

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CH2 Solutions - ANSWERS TO EXERCISES Exercise 2-1 Part A...

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