Problem 1-6 (LO 7) Cash purchase, several of each priority, with goodwill. Tweedy

Corporation is contemplating the purchase of the net assets of Sylvester Corporation in anticipation

of expanding its operations. The balance sheet of Sylvester Corporation on December 31,

20X1, is as follows:

1-60 Part 1 COMBINED CORPORATE ENTITIES AND CONSOLIDATIONS

Required _ _ _ _ _

Sylvester Corporation

Balance Sheet

December 31, 20X1

Current assets: Current liabilities:

Notes receivable . . . . . . . . . . . . $ 24,000 Accounts payable . . . . . . . . . . . $ 45,000

Accounts receivable . . . . . . . . . . 56,000 Payroll and benefit-related

Inventory . . . . . . . . . . . . . . . . . 31,000 liabilities . . . . . . . . . . . . . . . 12,500

Other current assets . . . . . . . . . . 18,000 Debt maturing in one year . . . . . 10,000

Total current assets . . . . . . . . . $129,000 Total current liabilities . . . . . . . $ 67,500

Investments . . . . . . . . . . . . . . . 65,000

Fixed assets: Other liabilities:

Land . . . . . . . . . . . . . . . . . . . $ 32,000 Long-term debt . . . . . . . . . . . . . $248,000

Building . . . . . . . . . . . . . . . . . 245,000 Payroll and benefit-related

Equipment . . . . . . . . . . . . . . . . 387,000 liabilities . . . . . . . . . . . . . . . 156,000

Total fixed assets . . . . . . . . . . 664,000 Total other liabilities . . . . . . . . 404,000

Intangibles: Stockholders equity:

Goodwill . . . . . . . . . . . . . . . . . $ 45,000 Common stock . . . . . . . . . . . . . $100,000

Patents . . . . . . . . . . . . . . . . . . 23,000 Paid-in capital in excess of par . . 250,000

Trade names . . . . . . . . . . . . . . 10,000 Retained earnings . . . . . . . . . . . 114,500

Total intangibles . . . . . . . . . . . 78,000 Total equity . . . . . . . . . . . . . 464,500

Total assets . . . . . . . . . . . . . . . $936,000 Total liabilities and equity . . . . . . $936,000

60 Business Combinations

An appraiser for Tweedy determined the fair values of the assets and liabilities to be as follows:

Assets Liabilities

Notes receivable . . . . . . . . . . . . $ 24,000 Accounts payable . . . . . . . . . . . $ 45,000

Accounts receivable . . . . . . . . . . 56,000 Payroll and benefit-related

Inventory . . . . . . . . . . . . . . . . . 30,000 liabilities . . . . . . . . . . . . . . . . 12,500

Other current assets . . . . . . . . . . 15,000 Debt maturing in one year . . . . . . 10,000

Investments . . . . . . . . . . . . . . . 63,000

Land . . . . . . . . . . . . . . . . . . . 55,000 Long-term debt . . . . . . . . . . . . . . 248,000

Building . . . . . . . . . . . . . . . . . 275,000 Payroll and benefit-related

Equipment . . . . . . . . . . . . . . . . 426,000 liabilitieslong-term . . . . . . . . . 156,000

Goodwill . . . . . . . . . . . . . . . . .

Patents . . . . . . . . . . . . . . . . . . 20,000

Trade names . . . . . . . . . . . . . . 15,000

The agreed-upon purchase price was $580,000 in cash. Direct acquisition costs paid in cash totaled

$20,000.

Using the above information, do zone analysis, and prepare the entry on the books of Tweedy

Corporation to purchase the net assets of Sylvester Corporation on December 31, 20X1.