Diamond acquired Heart's net assets. At the time of the acquisition Heart's Balance sheet was as follows:
Accounts Receivable $130,000
Inventory 70,000
Equipment, Net 50,000
Building, Net 250,000
Land 100,000
Total Assets $600,000
Bonds Payable $100,000
Common Stock 50,000
Retained Earnings 450,000
Total Liabilities and Stockholders' Equity $600,000
Fair values on the date of acquisition:
Inventory $100,000
Equipment 30,000
Building 350,000
Land 120,000
Brand Name 50,000
Bonds payable 120,000
Acquisition costs: $ 5,000
Required:
Record the entry for the purchase of the net assets of Heart by Diamond at the following cash prices:
a. $700,000
b. $300,000
Fair value of acquired net assets:
Accounts receivable $130,000
Inventory 100,000
Equipment 30,000
Buildings 350,000
Land 120,000
Brand name 50 000
Bonds payable (120,000)
Total $660,000
a. Accounts Receivable 130,000
Inventory 100,000
Equipment 30,000
Building 350,000
Land 120,000
Brand Name 50,000
Goodwill ($700,000 - $660,000) 40,000
Acquisition Expenses 5,000
Bonds Payable
100,000
Premium on Bonds Payable
20,000
Cash ($700,000 + $5,000)
705,000
b. Accounts Receivable 130,000
Inventory 100,000
Equipment 30,000
Building 350,000
Land 120,000
Brand Name 50,000
Acquisition Expenses 5,000
Bonds Payable
100,000
Premium on Bonds Payable
20,000
Gain on Acquisition of Business ($300,000 - $660,000)
360,000
Cash ($300,000 + $5,000)
305,000
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