Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Parrot Incorporated purchased the assets and liabilities of Sparrow Company at the close of business on December 31, 2013. Parrot borrowed $2,000,000 to complete this

Parrot Incorporated purchased the assets and liabilities of Sparrow Company at the close of business on December 31, 2013. Parrot borrowed $2,000,000 to complete this transaction, in addition to the $640,000 cash that they paid directly. The fair value and book value of Sparrow's recorded assets and liabilities as of the date of acquisition are listed below. In addition, Sparrow had a patent that had a fair value of $50,000. Book Value Fair Value Cash $120,000 $120,000 Inventories 220,000 250,000 Other current assets 630,000 600,000 Land 270,000 320,000 Plant assets-net 4,650,000 4,600,000 Total assets $5,890,000 $5,890,000 Accounts payable $1,200,000 $1,200,000 Notes payable 2,100,000 2,100,000 Capital stock, $5 par 700,000 Additional paid-in capital 1,400,000 Retained earnings 490,000 Total liabilities & equities $5,890,000 Part 1: Prepare Parrot's general journal entry for the acquisition of Sparrow, assuming that Sparrow survives as a separate legal entity. Part 2: Prepare Parrot's general journal entry for the acquisition of Sparrow, assuming that Sparrow will dissolve as a separate legal entity.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Worship Audit Making Good Worship Better

Authors: Mark Earcy

1st Edition

1851742948, 978-1851742943

More Books

Students also viewed these Accounting questions