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Exercise 1A: Asset Purchase of Another Company CheapBeer Inc. wants to purchase the net assets of FancyBrew Inc. for purposes of horizontal consolidation and will
| Exercise 1A: Asset Purchase of Another Company | |||||||||||||||
| CheapBeer Inc. wants to purchase the net assets of FancyBrew Inc. for purposes of horizontal consolidation and will pay $750,000 cash for them. The balance sheet for FancyBrew Inc. on the date of purchase is as follows: | |||||||||||||||
| FancyBrew Inc. | |||||||||||||||
| Balance Sheet as of 7/1/20X1 | |||||||||||||||
| Assets |
Liabilities & Owners' Equity | ||||||||||||||
| Book Value | Fair Market Value | Book Value | Fair Market Value | ||||||||||||
| Cash | $0 | $0 | A/P | $75,000 | $75,000 | ||||||||||
| A/R | 60,000 | 50,000 | Notes Payable | 25,000 | 25,000 | ||||||||||
| Inventory | 75,000 | 80,000 | Mortgage Payable | 50,000 | 50,000 | ||||||||||
| Net Fixed Assets | 150,000 | 200,000 | Total Liabilities: | $150,000 | |||||||||||
| Patents | 0 | 25,000 | |||||||||||||
| Common Stock | 50,000 | ||||||||||||||
| Retained Earnings | 85,000 | ||||||||||||||
| Total Equity: | $135,000 | ||||||||||||||
| Total Assets: | $285,000 | Total Liabilities & O.E.: | $285,000 | ||||||||||||
| A) Prepare the journal entry amounts for this asset acquisition on the books of CheapBeer Inc. by entering the proper debit and credit amounts in the gray-shaded cells below. | |||||||||||||||
| Account | Debits | Credits | |||||||||||||
| A/R | |||||||||||||||
| Inventory | |||||||||||||||
| Net Fixed Assets | |||||||||||||||
| Patents | |||||||||||||||
| Goodwill | |||||||||||||||
| Cash | |||||||||||||||
| A/P | |||||||||||||||
| Notes Payable | |||||||||||||||
| Mortgage Payable | |||||||||||||||
| Total | $0 | $0 | |||||||||||||
| B) Prepare the journal entry amounts for this asset acquisition on the books of FancyBrew Inc. by entering the proper debit and credit amounts in the cells below. | |||||||||||||||
| Account | Debits | Credits | |||||||||||||
| Cash | |||||||||||||||
| A/P | |||||||||||||||
| Notes Payable | |||||||||||||||
| Mortgage Payable | |||||||||||||||
| A/R | |||||||||||||||
| Inventory | |||||||||||||||
| Net Fixed Assets | |||||||||||||||
| Gain on Sale of Net Assets | |||||||||||||||
| Total | $0 | $0 | |||||||||||||
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Public Sector Accounting And Auditing In Europe The Challenge Of Harmonization
Authors: I. Brusca, E. Caperchione, S. Cohen, F Manes Rossi
2015th Edition
1137461330, 978-1137461339
