Working backward from purchase data to reconstruct pooling. (Requires Appendix 1 1.2: adapted from a problem by
Question:
Working backward from purchase data to reconstruct pooling. (Requires Appendix 1 1.2: 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. 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 of S980.000 comprised $150,000 of par value of common shares, $430,000 of additional paid-in capital, and $400,000 of retained earnings.
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 journal entry would Homer have made for the acquisition if it had qualified for a pooling of interests?
Step by Step Answer:
Financial Accounting An Introduction To Concepts Methods And Uses
ISBN: 9780030259623
9th Edition
Authors: Clyde P. Stickney, Roman L. Weil