Question
On 1/1/2021 Shack Co. purchased Mansion Co. for $5,000,000. The following is the balance sheet of Mansion Co on 1/1/2021: Cash $800,000 Receivables $960,000 Inventories
On 1/1/2021 Shack Co. purchased Mansion Co. for $5,000,000. The following is the balance sheet of Mansion Co on 1/1/2021:
| Cash | $800,000 |
| Receivables | $960,000 |
| Inventories | $818,000 |
| PPE, net | $1,000,000 |
Total Assets | $3,578,000 | |
|
|
|
| Accounts Payable | $600,000 |
| Notes Payable | $500,000 |
| Capital Stock | $1,000,000 |
| Retained Earnings | $1478,000 |
Total Liabilities and OE | $3,578,000 |
The fair market values of Mansion Co.s assets and liabilities resemble their book values at the time of acquisition, with the following exceptions: the book value of Mansions inventories was overvalued by $18,000, and the book value of Mansions PPE was undervalued by $100,000. Further, the fair market value of Mansion Co.s trade name, which was internally developed, was $900,000.
______________________________
The journal entry Shack Co. will record when it purchases Mansion Co. will contain a....
Question 11 options:
credit to Accounts Payable for $650,000 | |
no debit or credit to Accounts Payable | |
credit to Accounts Payable for $600,000 | |
debit to Accounts Payable for $650,000 | |
debit to Accounts Payable for $600,000 |
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