Question
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
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:
Sylvester Corporation
Balance Sheet
December 31, 20X1
Current assets:
Current liabilities:
Notes receivable
Br.24,000
Accounts payable
Br.45,000
Accounts receivable
56,000
Accrued liabilities
12,500
Inventory
31,000
Debt maturing in one year
10,000
Other current assets
18,000
Total current liabilities
Br. 67,500
Total current assets
Br.129,000
Investments
65,000
Fixed assets:
Other liabilities:
Land
Br.32,000
Long-term debt
Br.248,000
Building.
245,000
Payroll & related liabilities
156,000
Equipment.
387,000
Total fixed assets
664,000
Total other liabilities
404,000
Intangibles:
Stockholders' equity:
Goodwill
Br.45,000
Common stock
Br.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
Br.936,000
Total liabilities and equity
Br.936,000
An appraiser for Tweedy determined the fair values of the assets and liabilities to be as follows:
ASSETS
LIABILITIES
Notes receivable
Br.24,000
Accounts payable
Br.45,000
Accounts receivable
56,000
Accrued liabilities
12,500
Inventory
30,000
Debt maturing in one year
10,000
Other current assets
15,000
Long-term debt
248,000
Investments
63,000
Payroll and related liabilities
156,000
Land
55,000
Building.
275,000
Equipment.
426,000
Goodwill
Patents
20,000
Trade names
15,000
The agreed-upon purchase price was Br. 580,000 in cash. Direct acquisition costs paid in cash totaled Br. 20,000.
Required:Using the above information, prepare the entry on the books of Tweedy Corporation to purchase the net assets of Sylvester Corporation on December 31, 20X1, using purchase method and acquisition method
Problem 2: HT Corporation is contemplating the acquisition of the net assets of Smith Company on December 31, 20X1. It is considering making an offer, which would include a cash payout of Br.290,000 along with giving 10,000 shares of its Br. 2 par value common stock that is currently selling for Br. 20 per share. The balance sheet of Smith Company is given below, along with estimated fair values of the net assets to be acquired.
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Managerial Accounting
Authors: Ray H. Garrison, Eric W. Noreen, Peter C. Brewer
13th Edition
978-0073379616, 73379611, 978-0697789938
