ch01_hw - Chapter 1 1 Chapter 1 BUSINESS COMBINATIONS...

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Chapter 1 1 Chapter 1 BUSINESS COMBINATIONS SOLUTIONS TO EXERCISES Solution E1-1 1 a 2 b 3 a 4 c 5 d Solution E1-2 [AICPA adapted] 1 d Plant and equipment should be recorded at $45,000, the $55,000 fair value less the $10,000 excess fair value of net assets acquired over investment cost. 2 c Investment cost $800,000 Less: Fair value of net assets Cash $ 80,000 Inventory 190,000 Property and equipment net 560,000 Liabilities (180,000 ) 650,000 Goodwill $150,000 1
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2 Business Combinations Solution E1-4 Journal entries on IceAge’s books to record the purchase Investment in Jester 2,550,000 Common stock, $10 par 1,200,000 Additional paid-in capital 1,350,000 To record issuance of 120,000 shares of $10 par common stock with a fair value of $2,550,000 for the common stock of Jester in a purchase business combination. Investment in Jester 25,000 Additional paid-in capital 15,000 Expenses of combination 20,000 Other assets 60,000 To record costs of registering and issuing securities as paid-in capital, direct cost of combination as investment, and indirect costs of combination as expenses. Current assets 1,100,000 Plant assets 1,775,000 Liabilities 300,000 Investment in Jester 2,575,000 To record allocation of the $2,575,000 cost of Jester Company to identifiable assets and liabilities according to their fair values, computed as follows: Cost $2,575,000 Fair value acquired 3,000,000 Negative goodwill $ 425,000 Plant assets at fair value $2,200,000 Less: Negative goodwill 425,000 Cost allocated to plant assets $1,775,000 2
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Chapter 1 3 Solution E1-5 Journal entries on the books of Danders Corporation to record merger with Harrison Corporation: Investment in Harrison 530,000 Common stock, $10 par 180,000 Additional paid-in capital 150,000 Cash 200,000 To record issuance of 18,000 common shares and payment of cash in the acquisition of Harrison Corporation in a merger. Investment in Harrison 70,000 Additional paid-in capital 30,000 Cash 100,000 To record costs of registering and issuing securities and additional direct costs of combination. Cash
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ch01_hw - Chapter 1 1 Chapter 1 BUSINESS COMBINATIONS...

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