Question
Anchor Corporation paid cash of $178,000 to acquire Zink Companys net assets on February 1, 20X3. The balance sheet data for the two companies and
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 immediately 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 | 140,000 | 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 | $ 85,000 | $ 55,000 | $ 55,000 |
Notes Payable | 150,000 | 120,000 | 120,000 |
Common Stock: | |||
$10 par value | 200,000 | ||
$6 par value | 18,000 | ||
Additional Paid-In Capital | 160,000 | 10,000 | |
Retained Earnings | 225,000 | 32,000 | |
Total Liabilities & Equities | $ 820,000 | $ 235,000 |
Required
a. Give the journal entry recorded by Anchor Corporation when it acquired Zink’s net assets.
b. Prepare a balance sheet for Anchor immediately following the acquisition.
c. 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.
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