Mokoagouw, Angie Lisy

Problem Chapter 1

p1-1

Prepare balance sheet after acquisition

Comparative balance sheets for Pin and San Corporations at December 31, 2010, are as follows (in thousands):

Pin San
Current assets $ 520,000 $ 240,000
Land $ 200,000 $ 400,000
Buildings-net $ 1,200,000 $ 400,000
Equipment-net $ 880,000 $ 960,000
Total assets $ 2,800,000 $ 2,000,000
Current Liabilities $ 200,000 $ 240,000
Capital stock, 10$ par $ 2,000,000 $ 800,000
Additional paid-in capital $ 200,000 $ 560,000
Retained earnings $ 400,000 $ 400,000
Total equities $ 2,800,000 $ 2,000,000

On January 2, 2011, Pin issues 60,000 shares of its stock with a market value of $40 per share for all
the outstanding shares of San Corporation in an acquisition. San is dissolved. The recorded book values
reflect fair values, except for the buildings of Pin, which have a fair value of $1,600,000, and the current
assets of San, which have a fair value of $400,000.

Pin Building Fair value $ 1,600,000

Pin Current assets Fair value $ 400,000
Par pays the following expenses in connection with the business combination:
Costs of registering and issuing securities $60,000
Other direct costs of combination $100,000
$160,000
REQUIRED: Prepare the balance sheet of Pin Corporation immediately after the acquisition

Jawaban :
Preliminary computations
Fair Value: Cost of investment in San at January 2
Book value of net assets
Excess fair value over book value

Excess assigned to:

Current assets
Remainder to goodwill
 Excess fair value over book value

Pin Corporation
Balance Sheet at January 2, 2011
Assets
Current assets
Land
Buildings-net
Equipment-net
Goodwil
Total assets

Liabilities and Stockholders' Equity

Current Liabilities
Capital stock, 10$ par
Additional paid-in capital
Retained earnigs
Total liabilities and stockholders' equity'

p1-2
Prepare balance sheet after an acquisition
On January 2, 2011, Pet Corporation enters into a business combination with Sea Corporation in which
Sea is dissolved. Pet pays $1,650,000 for Sea, the consideration consisting of 66,000 shares of Pet $10
par common stock with a market value of $25 per share. In addition, Pet pays the following expenses in
cash at the time of the merger:
Finders' fee
Accounting and legal fees
Registration and issuance costs of securities

Balance sheet and fair value information for the two companies on December 31, 2010, immediately
before the merger, is as follows :
Pet Book Value
Cash $ 300,000
Accounts receivable-net $ 460,000
Inventories $ 1,040,000
Land $ 800,000
Buildings-net $ 2,000,000
Equipment-net $ 1,000,000
Total assets $ 5,600,000
Accounts payable $ 600,000
Note payable $ 1,200,000
Capital stock, $10 par $ 1,600,000
Other paid-in capital $ 1,200,000
Retained earnings $ 1,000,000
Total liabilities and owners' equity' $ 5,600,000

REQUIRED: Prepare a balance sheet for Pet Corporation as of January 2, 2011, immediately after the merger,
assuming the merger is treated as an acquisition.

jawaban
Pet Corporation
Balance Sheet
at January 2, 2011

Assets
Current assets
Cash $ 80,000
Accounts receivable-net $ 540,000
Inventories $ 1,280,000

Plant assets
Land $ 1,100,000
Buildings-net $ 2,600,000
Equipment-net $ 1,500,000
Goodwill $ 310,000
Total Assets $ 7,410,000

Liabilities and Stockholders' Equity

Liabilities
Accounts payable $ 680,000
Note payable $ 1,560,000

Stockholders' equity
Capital stock, $10 par $ 2,260,000
Other paid-in capital $ 2,110,000
Retained earnings $ 800,000
Total liabilities and stocholders' equity $ 7,410,000

p1-4
Journal entries and balance sheet for an acquisition
On Jan. 2017, Pat Corporation paid $5,000,000 for Saw Corporations voting common stock and Saw was
dissolved. The purchase price consisted of 100,000 shares of Pats common stock with a market value of
$4,000,000, plus $1,000,000 cash. In addition, Pat paid $100,000 for registering and issuing the 100,000
shares of common stock and $200,000 for other costs of combination. Balance sheet information for the
companies immediately before the acquisition is summarized as follows:
Pat Saw
Book Value Book Value
Cash $ 6,000,000 $ 480,000
Account Receivable-net $ 2,600,000 $ 720,000
Notes receivable-net $ 3,000,000 $ 600,000
Inventories $ 5,000,000 $ 840,000
Other current assets $ 1,400,000 $ 360,000
Land $ 4,000,000 $ 200,000
Building-net $ 18,000,000 $ 1,200,000
Equipment-net $ 20,000,000 $ 1,600,000
Total assets $ 60,000,000 $ 6,000,000
Accounts Payable $ 2,000,000 $ 600,000
Mortgage payable-10% $ 10,000,000 $ 1,400,000
Capital stock, $10 par $ 20,000,000 $ 2,000,000
Paid-in Capital $ 16,000,000 $ 1,200,000
Retained earnings $ 12,000,000 $ 800,000
Total liabilities & equities $ 60,000,000 $ 6,000,000

REQUIRED
1. Prepare journal entries for Pat Corporation to record its acquisition of Saw Corporation, including all
allocations to individual asset and liability accounts.
2. Prepare a balance sheet for Pat Corporation on January 2, 2011, immediately after the acquisition and
dissolution of Saw.

Par pays the following expenses in connection with the business combination:
Costs of registering and issuing securities $100,000
Other direct costs of combination $200,000
$300,000

Pat pays $5,000,000 Shares $100,000

par $10 Market value $4,000,000 cash
Jawaban:
1 Journal entries to record this acquisition of saw corporation
Investment in Saw $ 5,000,000
Capital stock, 10$ par $ 1,000,000
Other paid-in capital $ 3,000,000
Cash $ 1,000,000

Investment Expense $200,000

Other paid-in capital $100,000
Cash $300,000

Cash $ 480,000
Account receivable $ 720,000
Note receivable $ 600,000
Invetories $ 1,000,000
Other current assets $ 400,000
Land $ 400,000
Buildings $ 2,400,000
Equipment $ 1,200,000
Accounts payable $ 600,000
Mortgage payable, 10% $ 1,200,000
Investment in Saw $ 5,000,000
Gain on Bargain purchase $200,000

Gain on Bargain Purchase Calculation

Acquisition price $ 5,000,000
Fair value of net assets acquired $ 5,400,000
$ 400,000
as follows (in thousands): Pin issues shares 60000
par value $10

er share for all

orded book values
0, and the current

$ 2,400,000
$ 1,760,000
$ 640,000

$ 160,000
$ 480,000
 $ 640,000

$ 760,000
$ 600,000
$ 1,600,000
$ 1,840,000
$ 480,000
$ 5,280,000

$ 440,000
$ 2,600,000
$ 1,940,000
$ 300,000
$ 5,280,000

poration in which
hares of Pet $10 Preliminary computations
owing expenses in Pet pays $1,650,000
par $10
$70,000
$130,000 Fair Value : Cost of acquiring Sea
$80,000 Fair Value of assets acquired and liabilities assumed
$280,000 Goodwill from acquisition of Sea

10, immediately

Sea Book Value Sea Fair Value

$ 60,000 $ 60,000
$ 100,000 $ 80,000
$ 160,000 $ 240,000
$ 200,000 $ 300,000
$ 400,000 $ 600,000
$ 600,000 $ 500,000
$ 1,520,000 $ 1,780,000
$ 80,000 $ 80,000
 $ 400,000 $ 360,000
$ 600,000
$ 100,000
$ 340,000
$ 1,520,000

fter the merger,

stock and Saw was

h a market value of
ssuing the 100,000
information for the

Saw
Fair Value
$ 480,000
$ 720,000
$ 600,000
$ 1,000,000
$ 400,000
$ 400,000
$ 2,400,000
$ 1,200,000
$ 7,200,000
$ 600,000
$ 1,200,000

ration, including all

r the acquisition and

$1,000,000

2 Pat Corporation
Balance Sheet
at January 2, 2011
(after business combination)

Assets:
Current Assets
Cash
Accounts receivable-net
Notes receivable-net
Inventories
Other current assets

Plant Assets
Land
Buildings-net
Equipment-net
Total assets
Liabilities and Stockholders Equity
Liabilities
Accounts payable
Mortgage payable, 10%

Stockholders Equity
Capital stock, $10 par
Other paid-in capital
Retained earnings
Total liabilities and stockholders equity
market value $ 40
 Shares 66000
Market value $25

acquiring Sea $1,650,000

acquired and liabilities assumed $ 1,340,000
isition of Sea $310,000
tion)
$ 5,180,000
$ 3,320,000
$ 3,600,000
$ 6,000,000
$ 1,800,000 $ 19,900,000

$ 4,400,000
$ 20,400,000
$ 21,200,000 $ 46,000,000
$ 65,900,000

$ 2,600,000
$ 11,200,000 $ 13,800,000

$ 21,000,000
$ 18,900,000
$ 12,200,000 $ 52,100,000
$ 65,900,000