Exercise 1-1

Purchase Price = $875,000; Acquisition costs = $15,000

Crown Company
Balance Sheet
12/31/2015

Assets Liabilities and Equity

Current assets $ 80,000 Liabilities $ 100,000
Land 70,000 Common stock ($10 pa 100,000
Building 450,000 Paid-in capital 150,000
Accumulated depreciation, Bldg (200,000) Retained earnings 250,000
Equipment 300,000
Accumulated depreciation, Equip (100,000)
$ 600,000 $ 600,000

Exercise 1-1 (Cont.)

Fair Market Values

Current assets $ 85,000
Land 90,000
Building 300,000
Equipment 275,000
Liabilities 102,000

Part 1

Value Analysis:
Price Paid $875,000
FMV of Net Assets Acquired:
Current Assets $ 85,000
Land 90,000
Building 300,000
Equipment 275,000
Liabilities (102,000) 648,000
Goodwill $227,000

1
Part 1 (Cont.)

Current assets 85,000

Land 90,000
Buildings 300,000
Equipment 275,000
Goodwill 227,000
Liabilities 102,000
Cash 875,000

Expense 15,000
Cash 15,000

Part 2
Cash 875,000
Accumulated depreciation, building 200,000
Accumulated depreciation, equipment 100,000
Liabilities 100,000
Current assets 80,000
Land 70,000
Building 450,000
Equipment 300,000
Gain on sale 375,000

Part 3
Investment in Crown 875,000
Cash 875,000

Expense 15,000
Cash 15,000