Question
On Dec 31, 2018, the balance sheets of Paper Inc. and Scissors Inc. were as follows: Paper Inc Scissors Inc Cash and Short-Term Securities $400,000
On Dec 31, 2018, the balance sheets of Paper Inc. and Scissors Inc. were as follows:
| Paper Inc | Scissors Inc |
|
|
|
Cash and Short-Term Securities | $400,000 | $ 25,000 |
Inventory | $ 50,000 | $ 10,000 |
Plant and Equipment (net) | $300,000 | $120,000 |
Total Assets | $750,000 | $155,000 |
|
|
|
Current Liabilities | $ 75,000 | $ 20,000 |
Bonds Payable | $100,000 | $ 30,000 |
Common Shares | $150,000 | $ 55,000 |
Retained Earnings | $425,000 | $ 50,000 |
Total Liabilities and Equity | $750,000 | $155,000 |
On that date, the fair values of Scissors's Assets and Liabilities were as follows:
Cash & Short-Term Securities | $ 32,000 |
Inventory | $ 11,000 |
Plant and Equipment (net) | $140,000 |
Current Liabilities | $ 15,000 |
Bonds Payable | $ 28,000 |
On Jan 1, 2019, Paper issued 6,000 new common shares with a market value of $42.00 per share as consideration for Scissors's net assets. Prior to the issue, Paper had 10,000 outstanding common shares. Required: a) Calculate the amount of Goodwill arising from this combination. b) Prepare the journal entry to record Paper's acquisition of Scissors's assets. c) Prepare Paper's Balance Sheet immediately following its acquisition of Scissors's net assets. d) Prepare Scissors's Balance Sheet following the acquisition.
e) Assume Paper paid $252,000 in cash as consideration for Scissors's net assets. Prepare Paper's Balance Sheet immediately following its acquisition of Scissors's net assets.
f) Assume Paper decided to purchase 100% of the voting shares of Scissors Inc. for $252,000 in Cash on Jan 1, 2019.
Prepare the journal entry to record Paper's acquisition of Scissors's shares.
Prepare Paper's Consolidated Balance Sheet immediately following its acquisition of Scissors's shares.
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