Advanced Accounting
12th Edition
ISBN: 9781305084858
Author: Paul M. Fischer, William J. Tayler, Rita H. Cheng
Publisher: Cengage Learning
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Chapter 2, Problem 7.2E
To determine
Concept Introduction: The elimination entries help the accountants to present the account balances in the case where the parent and subsidiary companies need to be shown as a single economic firm. These entries appear on the consolidated statement worksheet while the accounting records of the specific firm will not have it.
To record: The elimination entries that would be made on a consolidated worksheet prepared on the date of acquisition.
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Arizona Corporation acquired the business Data Systems for $310,000 cash and assumed all liabilities at the date of
purchase. Data's books showed tangible assets of $320,000, liabilities of $17,000, and stockholders' equity of $303,000. An
appraiser assessed the fair market value of the tangible assets at $300,000 and liabilities at $17,000 at the date of
acquisition. Arizona Corporation's financial condition just prior to the acquisition is shown in the following statements
model.
Balance Income
Sheet Statement
Assets
Cash
=
+
Liabilities +
Tangible
Assets
ΝΑ
+
Stockholders
Equity
Goodwill
Revenue Expenses =
+ ΝΑ
=
ΝΑ +
Net
Income
520,000 +
Required
1.Compute the amount of goodwill acquired.
2.Record the acquisition in a financial statements model. Arizona Corporation's financial condition just prior to the
acquisition is shown in the financial statements model.
3.Record the acquisition in general journal format.
520,000 NA
Statement
of Cash
Flows
ΝΑ
=
ΝΑ ΝΑ
On January 1, Year 1, East Company purchased West Company. East Company paid $670,000 cash and assumed all of West Company's liabilities.
West's books showed tangible assets of $578,000, liabilities of $54,000, and equity of $632,000. An appraiser assessed the fair market value of the
tangible assets at $622,000 at the date of acquisition. On December 31, Year 4 East determines that the goodwill suffered a $32,000 permanent
impairment. However, on December 31, Year 6 East estimated that it had recovered $12,000 of the impairment that had previously been considered to
be permanent impairment. Based on this information, the book value of the goodwill shown on the December 31, Year 6 balance sheet is:
Multiple Choice
O
O
O
$102,000.
$134,000.
$54,000.
$70,000.
Phoenix Corporation acquired the business Sun Systems for $315,000 cash and assumed all liabilities at the date of purchase. Sun’s books showed tangible assets of $330,000, liabilities of $18,000, and stockholders’ equity of $312,000. An appraiser assessed the fair market value of the tangible assets at $305,000 and liabilities at $18,000 at the date of acquisition. Phoenix Corporation’s financial condition just prior to the acquisition is shown in the following statements model.
Required
1 Compute the amount of goodwill acquired.
2 Record the acquisition in general journal format.
Chapter 2 Solutions
Advanced Accounting
Ch. 2 - Prob. 1UTICh. 2 - Prob. 2UTICh. 2 - Prob. 3UTICh. 2 - Prob. 4UTICh. 2 - Prob. 5UTICh. 2 - Prob. 6UTICh. 2 - Santos Corporation is considering investing in...Ch. 2 - Prob. 2.1ECh. 2 - Prob. 2.2ECh. 2 - Prob. 3.1E
Ch. 2 - Prob. 3.2ECh. 2 - Prob. 4.1ECh. 2 - Prob. 4.2ECh. 2 - Prob. 4.3ECh. 2 - Prob. 5.1ECh. 2 - Prob. 5.2ECh. 2 - Prob. 6.1ECh. 2 - Prob. 6.2ECh. 2 - Prob. 7.1ECh. 2 - Prob. 7.2ECh. 2 - Prob. 8.1ECh. 2 - Prob. 9.1ECh. 2 - Prob. 9.2ECh. 2 - Prob. 9.4ECh. 2 - Prob. 2A.1AECh. 2 - Prob. 2.1.1PCh. 2 - Prob. 2.1.2PCh. 2 - Prob. 2.2.1PCh. 2 - Prob. 2.2.2PCh. 2 - Prob. 2.2.3PCh. 2 - Prob. 2.3.1PCh. 2 - Prob. 2.3.2PCh. 2 - Prob. 2.3.3PCh. 2 - Prob. 2.4.1PCh. 2 - Prob. 2.4.2PCh. 2 - Prob. 2.4.3PCh. 2 - Prob. 2.5.1PCh. 2 - Prob. 2.5.2PCh. 2 - Prob. 2.5.3PCh. 2 - Prob. 2.6.1PCh. 2 - Prob. 2.6.2PCh. 2 - Prob. 2.7.1PCh. 2 - Prob. 2.7.2PCh. 2 - Prob. 2.8.1PCh. 2 - Prob. 2.8.2PCh. 2 - Prob. 2.9.1PCh. 2 - Prob. 2.9.2PCh. 2 - Prob. 2.10.1PCh. 2 - Prob. 2.11.1PCh. 2 - Prob. 2.12.1PCh. 2 - Prob. 2.12.2PCh. 2 - Prob. 2.13.1PCh. 2 - Prob. 2.13.2PCh. 2 - Prob. 2.14.1PCh. 2 - Prob. 2.14.2PCh. 2 - Prob. 2.15.1PCh. 2 - Prob. 2.15.2PCh. 2 - Prob. 2A.1.1APCh. 2 - Prob. 2A.1.2APCh. 2 - Prob. 2.1.1CCh. 2 - Prob. 2.1.2C
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