Answered step by step
Verified Expert Solution
Question
1 Approved Answer
On June 1, 2015, JenStar purchased SouthCo by acquiring their net assets for a cash payment of $310,000 and a note payable of $115,000. Below
On June 1, 2015, JenStar purchased SouthCo by acquiring their net assets for a cash payment of $310,000 and a note payable of $115,000. Below is the balance sheet of SouthCo on the acquisition date, and the corresponding fair market values. Fair Value Assets Cash $85,000 $85,000 Accounts receivable (net of $16,000 allowance) 65,000 65,000 Inventory. 60,000 61,000 Land 80,000 100,000 Building (net of $18,000 accumulated depreciation) 135,000 118,000 Machinery (net of $29,000 accumulated depreciation) 95.000 79,000 Patents (net of $36,000 accumulated amortization)... 12.000 17,000 Total $532,000 $525.000 Liabilities and Shareholders' Equity Accounts payable $165,000 $165,000 Common shares 367,000 Total $532,000 Total assets. Enter an appropriate description when entering the transactions in the journal. Dates must be entered in the format ddimmm (ie, January 15 would be 15/Jan). Please make sure your final answer(s) ar accurate to 2 decimal places. (a) Record the June 1, 2015 entry for JenStar. General Journal Page G5 Date Account/Explanation PR Debit Credit (b) On December 31, 2015, JenStar tests its goodwill for impairment. It is determined that the fair value of goodwill is now $23,000. Record any necessary entries on that date. General Journal Page G5 Date Account/Explanation PR Debit Credit (c) Assume that instead of paying a total of $425,000 for the acquisition, the only payment required by JenStar was $310,000 cash. After a reassessment of all the variables, values and measurement procedures, how would JenStar classify the bargain purchase (or "negative" goodwill)? JenStar would (select one) (select one) record the bargain purchase or negative goodwill as a gain in net income Irecord to "Negative goodwill account as a credit amount on the balance sheet reduce the amounts of all the non-monetary assets on a proportionate basis to eliminate the bargain purchase or negative goodwill amount
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started