Question
Purchased goodwill. Company A has the following net assets: Assets Carrying Value Liabilities & Equity Carrying Value Cash $25,000 Current liabilities $55,000 Accounts receivable 35,000
Purchased goodwill.
Company A has the following net assets:
| Assets | Carrying Value | Liabilities & Equity | Carrying Value |
| Cash | $25,000 | Current liabilities | $55,000 |
| Accounts receivable | 35,000 | Common stock | 100,000 |
| Inventory | 42,000 | Retained earnings | 100,000 |
| PPE (net) | 153,000 |
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| Totals | $255,000 |
| $255,000 |
The fair values of Company A are
| Assets | Fair Value |
| Cash | $25,000 |
| Accounts receivable | 35,000 |
| Inventory | 122,000 |
| PPE (net) | 205,000 |
| Patents | 18,000 |
| Liabilities | (55,000) |
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| Fair value of net assets | $350,000 |
Company B purchases Company A for $400,000. Write the journal entry to record the purchase.
| Date | Account | Debit | Credit |
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Business Accounting
Authors: Frank Wood, Alan Sangster
7th Edition
0273619829, 9780273619826
