HW 2 with solution Ch 2 Consolidation

HW 2 with solution Ch 2 Consolidation - 2-1 Homework Ch 2...

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Unformatted text preview: 2-1 Homework Ch 2: Three Problems:2 – 14, 2-19, and 2 – 21. Solutions:Problem 1: 2-14 (12 minutes) (Journal entries to record a merger—acquired company dissolved)Inventory 600,000 Land 990,000 Buildings 2,000,000 Customer relationships 800,000 Goodwill 690,000 Accounts payable 80,000 Common stock 40,000 Additional paid-in capital 960,000 Cash 4,000,000 Combination expenses 42,000 Cash 42,000 Additional paid-in capital 25,000 Cash 25,000 2-2 a. 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 transferred as follows: Problem 2: 2-19. (50 Minutes) (Determine consolidated balances for a bargain purchase.)Fair value of net assets acquired $515,000* Fair value of consideration transferred Gain on bargain purchase $115,000400,000•Tucker’s FV of net identifiable assets = BV of Tucker (200,000 + 120,000 + 340,000) + FMV/BV difference of certain assets (5,000 + 20,000 + 30,000) = $515,000 In a bargain purchase, the acquisition is recorded at the fair value of the net assets acquired instead of the fair value of the consideration transferred (an exception to the general rule). Prior to preparing a consolidation worksheet, Marshall records the three transactions that occurred to create the business combination. 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...
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HW 2 with solution Ch 2 Consolidation - 2-1 Homework Ch 2...

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