Advanced Accounting 5th ed ch2 solutions(3)

Accounts Receivable 231,000 Inventory 330,000 Land 550,000 Buildings and Equipment 1,144,000 Goodwill 848,000 Allowance for Uncollectible Accounts ($231,000 - $198,000) 33,000 Current Liabilities 275,000 Bonds Payable 450,000 Premium on Bonds Payable ($495,000 - $450,000) 45,000

1,500,000 Preferred Stock (15,000 $100)

300,000 Common Stock (30,000 $10)

450,000 Other Contributed Capital ($25 - $10) 30,000

Cash 50,000

Cost of acquisition ($1,500,000 + $750,000 + $50,000) = $2,300,000 Fair value of net assets (198,000 + 330,000 + 550,000 + 1,144,000 – 275,000 – 495,000) = Goodwill =

Cash

Receivables Inventory Land

Plant and Equipment Goodwill* Accounts Payable Bonds Payable Premium on Bonds Payable** Cash

** Present value of maturity value, 12 periods @ 4%: 0.6246 $480,000 = Present value of interest annuity, 12 periods @ 4%: 9.38507 $24,000 = Total present value Par value

Premium on bonds payable

96,000 55,200 126,000 198,000 466,800 137,450

44,400 480,000 45,050 510,000

$299,808 525,050 $510,000 136,800

*Cash paid

Less: Book value of net assets acquired ($897,600 – $44,400 – $480,000) Excess of cash paid over book value Increase in inventory to fair value (15,600) Increase in land to fair value (28,800) Increase in bond to fair value Total increase in net assets to fair value Goodwill

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