Problem 2 (25 minutes, 12 points) On July 1, 2020 Wooldcik Inc. acquired all of the outstanding voting shares of Hageland Corporation. After this transaction Hogeland ceased to exist as a legal entity. At the date of the acquisition Hogeland had the following accounts: Book value () Cash 80,000 Accounts receivables 300,000 Inventory 220,000 Goodwill 150,000 Equipment 470,000 Buildings 230,000 Land 100,000 Accounts payable -50,000 Long-term debts -500,000 Common stock -100,000 Retained earnings, January 1 -750,000 Income 2020 (January 1-July 1) -150,000 These accounts represent the fair value of the assets and liabilities, except for: The fair value of the Buildings is 500,000 The net present value of the long-term debts is 450,000 The accounts receivable are overstated for an amount of 20,000 Research & Development activity in process has an appraised value of 100,000 To pay for this acquisition Wooldrik issues 10,000 new shares that have a par value of 10 per share and a fair value of 150 per share. An investment bank has send an invoice of 25,000 to Wooldrik for assistance in arranging the combination, this invoice was not yet paid. The stock issuance costs of 20,000 were paid immediately. Question 7 Prepare the journal entries that Wooldrik has made of this investment. Problem 2 (25 minutes, 12 points) On July 1, 2020 Wooldcik Inc. acquired all of the outstanding voting shares of Hageland Corporation. After this transaction Hogeland ceased to exist as a legal entity. At the date of the acquisition Hogeland had the following accounts: Book value () Cash 80,000 Accounts receivables 300,000 Inventory 220,000 Goodwill 150,000 Equipment 470,000 Buildings 230,000 Land 100,000 Accounts payable -50,000 Long-term debts -500,000 Common stock -100,000 Retained earnings, January 1 -750,000 Income 2020 (January 1-July 1) -150,000 These accounts represent the fair value of the assets and liabilities, except for: The fair value of the Buildings is 500,000 The net present value of the long-term debts is 450,000 The accounts receivable are overstated for an amount of 20,000 Research & Development activity in process has an appraised value of 100,000 To pay for this acquisition Wooldrik issues 10,000 new shares that have a par value of 10 per share and a fair value of 150 per share. An investment bank has send an invoice of 25,000 to Wooldrik for assistance in arranging the combination, this invoice was not yet paid. The stock issuance costs of 20,000 were paid immediately. Question 7 Prepare the journal entries that Wooldrik has made of this investment