This is the project in Advanced Accounting. If someone can solve this problem, he has to be really good :)

\f\f\f\f\f\f\f\f\f\f\f\f\fAnswer 1 Journal Entries Particulars 1/1/2012 Other Assets - Holding Account Cash Acquisition of New Castle Coffee 1/1/2012 Other Assets - Holding Account Cash Account Purchase of 40% interest in Newark Coffee Activity 1/3/2012 Cash Other Assets - Holding Account Dividends received from Newark Coffee Reclassification Entry: Acquisition Expense Debt Issue Costs Equity Investment in New Castle Coffee Equity Investment in Newark Coffee Activity Other Assets - Holding Account 03/31/2012 Equity Investment in New Castle Coffee Earnings in Investment in New Castle Coffee Equity Investment in Newark Coffee Activity Earnings in Investment in Newark Coffee Activity Debit Credit 168,000.00 ### 44,000.00 44,000.00 2,000.00 2,000.00 12,000.00 6,000.00 150,000.00 42,000.00 2,000.00 7,714.67 7,714.67 4,100.00 4,100.00 Schedule 2 Trial Balance of New Castle Coffee as of 01/01/12 Accounts WTC Checking WTC money market account Accounts Receivable Allowance for uncollectible accounts Inventory Prepaids rent - current Land Building Equipment Accumulated Depreciation Debt set up costs, net Accounts payable Accrued payroll and benefits Accrued expenses Note payable 2015 Income tax payable Deferred tax liability Common stock 1,000 shares, par $1.00 Additional paid in capital Retained earnings(loss) Debit 1,000 4,000 15,000 Total 221,000 Schedule 2 Trial Balance of New Castle Coffee as of 01/01/12 (at fair values) Credit 2,000 8,000 5,000 50,000 85,000 48,000 15,000 5,000 12,000 3,000 2,000 100,000 2,500 3,800 1,000 74,000 5,700 Fair Value of Consideration Transferred Book Value of Equity Between between Consideration Transferred and Book Value Fair Value Adjustments Goodwill 221,000 150,000 (80,700) 69,300 (29,000) 40,300 Schedule 2a New Castle Coffee Acquisition Support Accounts WTC Checking WTC money market account Accounts Receivable Allowance for uncollectible accounts Inventory Prepaids rent - current Land Building Equipment Debt set up costs, net Accounts payable Accrued payroll and benefits Accrued expenses Note payable 2015 Income tax payable Deferred tax liability Fair Value of Net Assets Appraisal Results Debit 1,000 4,000 15,000 Credit The appraisal of the fixed assets resulted in the f 2,000 Land Building Equipment $ 60,000 92,000 45,000 Fixed Assets Fair Market Value 8,000 5,000 60,000 92,000 45,000 5,000 $ 197,000 Due Diligence Review 12,000 3,000 2,000 100,000 2,500 3,800 109,700 As part of the due diligence process, it was The following balances were indicated. Income tax payable (current liability) $ Deferred tax liability (long-term liabil 2,500 3,800 following fair market values: s determined that New Castle Coffee was not accruing for income taxes. Acquisition Journal Entry WTC Checking 1,000 WTC money market account 4,000 Accounts Receivable 15,000 Inventory 8,000 Prepaids rent - current 5,000 Land 50,000 Building 85,000 Equipment 48,000 Debt set up costs, net 5,000 Allowance for uncollectible accounts Accumulated Depreciation Accounts payable Accrued payroll and benefits Accrued expenses Note payable 2015 Income tax payable Deferred tax liability Equity Investment in New Castle Coffee 2,000 15,000 12,000 3,000 2,000 100,000 2,500 3,800 80,700 Land 10,000 Building 7,000 Accumulated Depreciation 12,000 Equity Investment in New Castle Coffee 29,000 Goodwill 40,300 Equity Investment in New Castle Coffee 40,300 Schedule 2 Trial Balance of New Castle Coffee as of 01/01/12 Schedule 3 Trial Balance of New Castle Coffee as of 03/31/12 Accounts Debit WTC Checking 1,000 WTC money market account 4,000 Accounts Receivable 15,000 Allowance for uncollectible accounts Inventory 8,000 Prepaids rent - current 5,000 Land 50,000 Building 85,000 Equipment 48,000 Accumulated Depreciation Debt set up costs, net 5,000 Accounts payable Accrued payroll and benefits Accrued expenses Note payable 2015 Common stock 1,000 shares, par $1.00 Additional paid in capital Retained earnings(loss) 12,000 3,000 2,000 100,000 1,000 74,000 12,000 Total 221,000 221,000 Credit 2,000 15,000 Schedule 4 Trial Balance of Java the Hut as of 12/31/11 Accounts Debit WTC Checking 1,500 WTC money market account 3,000 Accounts Receivable 21,000 Allowance for uncollectible accounts Inventory 13,765 Prepaids rent - current 3,750 Land 50,000 Building 85,000 Equipment 48,000 Construction in progress 16,000 Accumulated Depreciation Debt set up costs, net 4,687 Accounts payable Accrued payroll and benefits Accrued expenses Note payable - Long term Advance payable Common stock 1,000 shares, par $1.00 Additional paid in capital Retained earnings(loss) - beginning Sales - coffee Sales - beans Sales - other Allowance for returns - beans 1,000 Allowance for returns - other 400 Cost of goods sold - coffee 39,000 Cost of goods sold - beans 10,000 Cost of goods sold - other 3,600 Selling expenses 6,000 Professional fees 4,800 Depreciation - Buildings (30 years) 31 Depreciation - Equipment (10 years 1,250 Bad debt expense 600 Administrative salaries 12,000 Other SG&A expenses 4,000 Interest income - money market Interest expense 2,000 Amortization of debt set up 313 Income tax provision 4,948 Accounts Debit DNB Checking 800 T. Rowe money market account 18,600 Accounts Receivable 46,800 Allowance for uncollectible accounts Inventory 51,250 Deferred tax asset 3,000 Land 185,000 Building 155,000 Equipment 98,000 Construction in progress 4,800 Accumulated Depreciation Debt set up costs, net 12,000 Accounts payable Accrued payroll and benefits Accrued expenses Note payable - Long term Revolving credit loan Deferred tax liability (long term) Common stock 10,000 shares, par $10.00 Additional paid in capital Retained earnings(loss) 47,250 13,200 8,900 175,000 27,749 4,440 100,000 125,000 18,500 Total 575,250 Total ### Credit 2,875 16,281 12,800 6,000 5,673 ### 8,000 1,000 74,000 12,000 65,000 25,000 8,000 15 ### 575,250 Schedule 5 Trial Balance of Java the Hut as of 03/31/12 Credit 936 54,275 Accounts Debit DNB Checking 1,500 T. Rowe money market account 8,000 Accounts Receivable 48,000 Allowance for uncollectible accounts Inventory 54,024 Deferred tax asset 3,197 Land 185,000 Building 155,000 Equipment 98,000 Construction in progress 25,200 Accumulated Depreciation Debt set up costs, net 11,000 Advance receivable8,000 Other assets - holding 210,000 Accounts payable Accrued payroll and benefits Accrued expenses Revolving credit loan (committed to 2011) Deferred tax liability (long term) Common stock 10,000 shares, par $10.00 Additional paid in capital Retained earnings(loss) - beginning Retained earnings(loss) - current year Sales - coffee Sales - beans Sales - other Allowance for returns - beans 3,500 Allowance for returns - other 650 Cost of goods sold - coffee 107,250 Cost of goods sold - beans 29,430 Cost of goods sold - other 7,425 Selling expenses 14,800 Professional fees 8,017 Depreciation - Buildings (30 years) 1,292 Depreciation - Equipment (10 years) 2,450 Bad debt expense 200 Administrative salaries 26,500 Other SG&A expenses 9,396 Interest income - money market Interest expense - note due 2005 3,500 Interest expense - revolving credit 5,319 Interest expense - amortization of d 1,000 Income tax provision 10,484 Total ### Credit 960 58,017 48,200 11,000 13,196 175,000 236,421 4,900 100,000 125,000 18,500 165,000 65,400 16,500 40 ### Schedule 3 Trial Balance of New Castle Coffee as of 03/31/12 Accounts WTC Checking WTC money market account Accounts Receivable Allowance for uncollectible accounts Inventory Prepaids rent - current Land Building Equipment Construction in progress Accumulated Depreciation Debt set up costs, net Accounts payable Accrued payroll and benefits Accrued expenses Note payable - Long term Advance payable Common stock 1,000 shares, par $1.00 Additional paid in capital Retained earnings(loss) - beginning Sales - coffee Sales - beans Sales - other Allowance for returns - beans Allowance for returns - other Cost of goods sold - coffee Cost of goods sold - beans Cost of goods sold - other Selling expenses Professional fees Depreciation - Buildings (30 years) Depreciation - Equipment (10 years) Bad debt expense Administrative salaries Other SG&A expenses Interest income - money market Interest expense Amortization of debt set up Income tax provision Net Income Total Unadjusted Fair Value Adjustments Debit Credit Debit Credit 1,500 3,000 21,000 2,875 13,765 3,750 50,000 10,000 85,000 7,000 48,000 16,000 16,281 12,000 4,687 12,800 6,000 5,673 ### 8,000 1,000 74,000 12,000 29,000 65,000 25,000 8,000 1,000 400 39,000 10,000 3,600 6,000 4,800 31 1,250 600 12,000 4,000 15 2,000 313 4,948 ### ### Adjusted Debit Credit 1,500 3,000 21,000 2,875 13,765 3,750 60,000 92,000 48,000 16,000 4,281 4,687 12,800 6,000 5,673 100,000 8,000 1,000 74,000 41,000 65,000 25,000 8,000 1,000 400 39,000 10,000 3,600 6,000 4,800 31 1,250 600 12,000 4,000 15 2,000 313 4,948 353,644 353,644 Income Statement Debit Credit Income Statement Debit Credit 1,500 3,000 21,000 2,875 13,765 3,750 60,000 92,000 48,000 16,000 4,281 4,687 12,800 6,000 5,673 100,000 8,000 1,000 74,000 41,000 65,000 25,000 8,000 1,000 400 39,000 10,000 3,600 6,000 4,800 31 1,250 600 12,000 4,000 15 2,000 313 4,948 8,073 98,015 98,015 263,702 8,073 263,702 Answer 6 Journal Entries Particulars 03/31/2012 Equity Investment in New Castle Coffee Earnings in Investment in New Castle Coffee Equity Investment in Newark Coffee Activity Earnings in Investment in Newark Coffee Activity Debit Credit 8,073.00 8,073.00 4,100.00 4,100.00 Accounts DNB Checking T. Rowe money market account WTC Checking WTC money market account Accounts Receivable Allowance for uncollectible accounts Inventory Deferred tax asset Prepaid rent - current Land Building Equipment Construction in progress Accumulated Depreciation Debt set up costs, net Advance receivableEquity Investment in New Castle Coffee Equity Investment in Newark Coffee Activity Goodwill Accounts payable Accrued payroll and benefits Accrued expenses Note payable - Long term Advance payable Revolving credit loan (committed to 2011) Income tax payable Deferred tax liability (long term) Common stock 10,000 shares, par $10.00 Additional paid in capital Retained earnings(loss) - beginning Retained earnings(loss) - current year Sales - coffee Sales - beans Sales - other Allowance for returns - beans Allowance for returns - other Cost of goods sold - coffee Cost of goods sold - beans Cost of goods sold - other Selling expenses Professional fees Depreciation - Buildings (30 years) Depreciation - Equipment (10 years) Bad debt expense Administrative salaries Other SG&A expenses Interest income - money market Interest expense - note due 2005 Interest expense - revolving credit Interest expense - amortization of debt set up co Income tax provision Acquisition Expense Earnings in Investment in New Castle Coffee Earnings in Investment in Newark Coffee Activity Total Java the Hut Debit Credit 1,500 8,000 New Castle Coffee Debit Credit Debit 1,500 8,000 1,500 3,000 69,000 1,500 3,000 21,000 48,000 960 54,024 3,197 2,875 13,765 58,017 17,000 8,000 157,715 46,100 Consolidation Adjustments Debit Credit Credit 3,835 67,789 3,197 3,750 235,000 240,000 146,000 41,200 3,750 50,000 85,000 48,000 16,000 185,000 155,000 98,000 25,200 16,281 4,687 10,000 7,000 74,298 12,000 21,687 8,000 157,715 46,100 358 150,000 40,300 48,200 11,000 13,196 175,000 12,800 6,000 5,673 100,000 8,000 61,000 17,000 18,869 275,000 8,000 236,421 236,421 4,900 100,000 125,000 18,500 2,500 3,800 1,000 74,000 5,700 165,000 65,400 16,500 65,000 25,000 8,000 3,500 650 107,250 29,430 7,425 14,800 8,017 1,292 2,450 200 26,500 9,396 1,000 400 39,000 10,000 3,600 6,000 4,800 31 1,250 600 12,000 4,000 40 3,500 5,319 1,000 10,484 12,000 8,700 101,000 199,000 24,200 230,000 90,400 24,500 4,500 1,050 146,250 39,430 11,025 20,800 12,817 1,323 3,700 800 38,500 13,396 15 2,000 58 300 55 5,500 5,319 1,313 15,432 12,000 313 4,948 1,000 74,000 5,700 - 7,715 4,100 1,049,949 Common stock Additional paid in capital Retained earnings Equity Investment in New Castle Coffee Land Building Accumulated Depreciation Equity Investment in New Castle Coffee 10,000 7,000 12,000 Goodwill Equity Investment in New Castle Coffee 1,049,949 1,000 74,000 5,700 40,300 80,700 29,000 40,300 Sales - Coffee Cost of Sales - Coffee 15,500 Cost of goods sold - coffee Inventory 1,225 Earnings in Investment in New Castle Coffee Equity Investment in New Castle Coffee 7,715 Depreciation - Buildings (30 years) Depreciation - Equipment (10 years) Accumulated Depreciation Total 15,500 1,225 7,715 58 300 358 336,644 336,644 1,386,593 1,372,278 150,358 150,358