E18 E113 Ena Acquisition of Net Assets ‘Sun Corporation concluded the fair value of Tender Company was $0,000 and paid that amount to acquire its net assets. Tender reported asseis with a book value of $55,000 and fair value of $71,000 and liabilities with a book value and fair value of $20,000 on the date of combination, Sun also paid $4,000 to a search firm for finder’ fees related to the acquisi Required Give the journal entries to be made by Sun to record its investment in Tender and its payment of the finder’s fees. Acquisition Using Debentures Fortune Corporation used debentures with a par value of $625,000 to acquire 100 percent of Sorden Company’s net assets on January 1. 20X2. On that date, the fair value of the bonds issued by Fortune was $608,000. The following balance shee! data were reported by Sorden: Balance Sheet Item Historical Cost Fair Value Cash & Receivables $50,000 Inventory 200,000 Land 100,000 Plant & Equipment 300,000 Less: Accumulated Depreciation Goodwal Total Assets Accounts Payable 5 50,000, Common Stock ‘Additional Paid-In Capital Retained Earnings ‘otal Licbiltis & Equities Required Give the journal entry that Fortune recorded at the time of exchange. Bargain Purchase Using the data presented ia E1-13, determine the amount Fortune Corporation would record as 1 gain on hargain purchase and prepare the journal entry Fortune would record at the time of the ‘exchange if Fortune issued bonds with a par value of $580,000 and a fair value of $564,000 in ‘completing the acquisition of Sorden,£1-21 Combined Balance Sheet ‘The following balance sheets were prepared for Adam Corporation and Best Company on January 1, 0X2. just before they entered into a business combination: Adam Corporation Item Book Value _ Fair Value Fair Value Cash & Receivables $150,000 $150,000 § 90,000 Inventory 380,000 160,000 Buildings & Equipment 430,000 240,000 Less: Accumulated Depreciation Total Assets ‘Accounts Payable $ 75,000 $ 75,000 § 50,000 Notes Payable 200,000 215,000 35,000 Common Stock: $8 par value 180,000 $6 par value 90,000 ‘Adcitional Paid.In Capital 140,000, 55,000 Retained Eamings 205,000 105,000, ‘Total Liabilities & Equities $800,000 $330,000 Adam acquired all of Best Company's assets and liabilities on January 1, 20X2,in exchange for its ‘common shares. Adam issued 8,000 shares of stock to complete the business combination, Required ‘Prepare a balance sheet of the combined company immediately following the acquisition, assum- ing Adam's shares were trading at $60 each.1-22 Recording a Business Combination ‘The following financial statement information was prepared for Blue Corporation and Sparse Company at December 31, 20X2: Blue Corporation ‘Sparse Company Cash ‘Accounts Receivable Inventory Land Buildings & Equipment $680,000 Less: Accumulated Depreciation (320,000) Goodwill Total Assets ‘Accounts Payable Bonds Payable Bond Premium ‘Common Stock Additional Paicein Capital Retained Earnings Total Liabilities & Equities $ 70,000 110,000 180,000 100,000 $195,000 Blue and Sparse agreed to combine as of January 1. 20X3. To effect the merger, Bluc paid finder’s fees of $30,000 and legal fees of $24,000. Biue also paid $15,000 of audit fees related to the issuance of stock, stock registration fees of $8,000, and stock listing application fees of $6,000. AtJanuary 1, 20X3, book values of Sparse Company’s assets and liabilities approximated mar- ket value except for inventory with a market value of $200,000, buildings and equipment with a market value of $350,000, and bonds payable with a market value of $105,000. All assets and liabilities were immediately recorded on Blue’s books. Required Give all joumal entries that Blue recorded assuming Blue issued 40,000 shares of $8 par value ‘common stock to acquire all of Sparse’s assets and liabilities in 2 business combination. Blue com- ‘mon stock was trading at $14 per share on January 1, 20X3.P1320 Business Combination with Goodwi Anchor Corporation paid cash of $178,000 to acquire Zink Company's net assets on February 1. 20X3. The balance sheet data for the two companies and fair value information for Zink imme ately before the business combination were: ‘Anchor Corporation Zink Company Balance Sheet Item Book Value Book Value Fair Value Cash $240,000 $20,000 $20,000 Accounts Receivable 149,000 35,000 35,000 Inventory 170,000 30,000 50,000 Patents 80,000 40,000 60,000 Buildings & Equipment 380,000 310,000 150,000 Less: Accumulated Depreciation (190,000) (200,000) Total Assets $820,000 $235,000 $315,000 Accounts Payable 585,000 555,000 5 55,000 Notes Payable 150,000 120,000 120,000 ‘Commen Stock: $10 par value 200,000 56 par value 18,000 Additional Paid-n Capital 160,000 Retained Earnings 225,000 Total Liabilities & Equities $820,000 Required ‘a. Give the journal entry recorded by Anchor Corporation when it acquired Zink’s net asscts. +b. Prepare a balance sheet for Anchor immediately following the acquisition. (¢. Give the journal entry to be recorded by Anchor if it acquires all of Zink’s common stock (instead of Zink’s net assets) for $178,000.P1234 Journal Entries On January 1, 20X3, PURE Products Corporation issued 12,000 shares of its $10 par value stock to-acquie the net assets of Light Steel Company. Underlying book value and fair value information for the balance sheet items of Light Steel atthe time of acquisition follow: Balance Sheet Item Book Value Cash $ 60,000 ‘Accounts Receivable 100,000 Inventory (IFO basis) 60,000 Land 50,000 Buildings & Equipment 400,000 Less: Accumulated Depreciation _(150,000) Total Assets ‘Accounts Payable $10,000 Bonds Payable 200,000, Common Stock (55 par value) 150,000 ‘Additional Paic-In Capital 70,000 Retained Earnings 90,000 ‘otal Liabilities & Equities Light Steel shares were selling at $18 and PURE Products shares were selling at $50 just before the merger announcement. Additional cash payments made by PURE Products in completing the acquisition were Finders fee paid to firm that located Light Steel $10,000 Audit fee for stock issued by PURE Products 3,000 Stock registration fee for new shares of PURE Products 5,000 Legal fees paid to assst in transfer of net assets 9,000 Cost of SEC registration of PURE Products shares 1,000 Required Prepare all journal entries to record the business combination on PURE Products’ books.