Working backward from purchase data. (Requires Appendix 11.2; adapted from a problem by S. A. Zeff.) On
Question:
Working backward from purchase data. (Requires Appendix 11.2; adapted from a problem by S. A. Zeff.) On May 1, Year 1, Homer acquired the assets and agreed to pay the liabilities of Tonga in exchange for 10,000 of Homer's common shares. Homer accounted for the acquisition of the net assets of Tonga using the purchase method. On the date of acquisition Tonga's book value of depreciable assets exceeded Homer's estimate of their market value, but Homer judged all other items on Tonga's books to reflect market value on that date. On the date of the acquisition, Tonga's shareholders' equity was \(\$ 980,000\). Tonga reported no goodwill on its balance sheet.
Homer made the following journal entry to record the acquisition:
a. What was the book value on Tonga's books of its total assets just before the acquisition?
b. What was the book value of depreciable assets of Tonga just before the acquisition?
Step by Step Answer:
Financial Accounting An Introduction To Concepts Methods And Uses
ISBN: 9780324183511
10th Edition
Authors: Clyde P. Stickney, Roman L. Weil