Pleasantville Company had the following balance sheet on January 1.
?
On January 2, Carrs Company came to an agreement to purchase Pleasantville by acquiring all of its outstanding shares for $575,000 in cash. On that date in time, the fair value of their inventory was $150,000, and the fair value of the equipment was $225,000. The book value is accurate as of January1, and was equal to fair value.
?
Cash
?
?
$ 175,000
Accounts Payable
$ 57,000
Inventory
?
?
157,000
Notes Payable
250,000
Property, plant, and equipment
200,000
Mortgage Payable
150,000
Patent
?
?
25,000
Retained Earnings
100,000
?
?
?
$ 557,000
?
?
$ 557,000
?
Required: 1.) Compute the goodwill associated with the purchase of Pleasantville.2.) Prepare the journal entry necessary at January 1, to record the acquisition of Pleasantville.
What will be an ideal response?
1.)
| Purchase Price of Pleasantville | ? | ? | $575,000 | |
| Pleasantville Company | ? | ? | ? | |
| Book value of identifiable net assets | ? | ? | ||
| ($557,000 - $457,000) | ? | ? | $100,000 | ? |
| Revaluation of inventory | ? | (7,000) | ? | |
| Revaluation of equipment | ? | 2,5000 | ? | |
| Current fair value of identifiable net assets | ? | ($118,000) | ||
| Difference attributable to goodwill | ? | $ 457,000 | ||
?2.)
| Cash | ? | ? | 175,000 | ? |
| Inventory | ? | ? | 150,000 | ? |
| Property, plant, and equipment | 225,000 | ? | ||
| Patent | ? | ? | 25,000 | ? |
| Goodwill | ? | ? | 457,000 | ? |
| ? | Accounts Payable | ? | 57,000 | |
| ? | Notes Payable | ? | 250,000 | |
| ? | Mortgage Payable | ? | 150,000 | |
| ? | Cash | ? | ? | 575,000 |
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