Page Schedule 2 Trial Balance of New Castle Coffee as of 1/1/18 Accounts Debit Credit Checking $ 1,000 Money Market Account 4,000 Accounts Receivable $ 15,000 Allowance for Uncollectable Accounts $ 2,000 Inventory $ 8,000 Prepaid Rent - Current 5,000 Land 50,000 Building 85,000 Equipment $ 48,000 Accumulated Depreciation $ 15,000 Debt Set-up Costs, net $ 5,000 Accounts Payable 12,000 Accrued Payroll and Benefits $ 3,000 Accrued Expenses $ 2,000 Notes Payable (12/31/16) $ 100,000 Common Stock (1,000 shares O/S, $1 par) $ 1,000 Additional Paid-In Capital $ 74,000 Retained Earnings (Loss) $ 12,000 Total $ 221,000 $ 221,000Schedule 2A New Castle Coffee Acquisition Support Appraisal Results The appraisal of the fived assets resulted in the following fair market values: Land $ 60,000 Building S 92,000 Equipment 45,000 Fixed Assets Fair Market Value $ 197,000 Due Diligence Review As part of the due diligence process, it was determined that New Castle Coffee was not accruing for income taxes. The following balances were indicated: Income tax payable (current liability) 2,500 Deferred tax liability (long-term liability) S 3,800 Total Due Diligence Adjustment $ 6,30031 32 Additional Calculations: 33 34 Differences between BV and FV: Book Value Fair Value Change 35 36 Land 10,000.00 $ 50,000 $ 60,000 $ 10,000 37 Building 8,000.00 $ 85,000 $ 92,000 $ 8,000 Equipment (Net) 7,000.00 $ 38,000 $ 45,000 $ 7,000 Total 25,000.00 $ 173,000 $ 197,000 $ 25,000 Objective #2: Prepare elimination journal entries to Breakdown acquisition cost: reflect fair values of New Castle Coffee on 1/1. Purchase Price - Book Value (Net Assets) = Differential Differential 48 - Fair Value 49 = Goodwill 50 51