Week 1 - Homework Answers

Week 1 - Homework Answers - Student Name: Instructor Class:...

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Student Name: Instructor Class: McGraw-Hill/Irwin Problem 02-19 MARSHALL COMPANY 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 «- Correct! 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 issued for Tucker acquisition at fair value) Combination Expenses 30,000 «- Correct! Cash 30,000 (To record payment of combination fees) Additional Paid-In Capital 12,000 «- Correct! 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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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
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This note was uploaded on 09/28/2011 for the course ACC 431 taught by Professor Talbert during the Spring '08 term at National.

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Week 1 - Homework Answers - Student Name: Instructor Class:...

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