1-5Jack Company is a corporation that was organized on July 1, 2015. The June 30, 2020, balance sheet for Jack is as follows: Assets Liabilities and Equity Williams Incorporated Balance Sheet December 31, 2015 The following fair values differ from existing book values: Inventory ………………..$250,000 Land…………………… 40,000 Building………………… 120,000 Assets Investments ………………………… Accountsreceivable ………………….. Allowancefordoubtfulaccounts………….. Inventory ………………………….. Prepaidinsurance ……………………. Land……………………………… Machineryandequipment(net) ………….. Goodwill………………………….. Totalassets……………………….. Liabilities and Equity $1,250,000 (300,000) $ 400,500 950,000 1,500,000 18,000 58,000 1,473,500 100,000 $4,500,0 Liabilities and Equity $1,250,000 (300,000) $ 400,500 950,000 1,500,000 18,000 58,000 1,473,500 100,000 $4,500,000 Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . Commonstock($10par)…………………. 1,200,000 Retainedearnings ……………………… 1,825,000 Totalliabilitiesandequity ………………. $4,500,000

The experience of other companies over the last several years indicates that the machinery and equipment can be sold at 130% of its book value. An analysis of the accounts receivable indicates that the realizable value is $925,000. An independent appraisal made in June 2020 values the land at $70,000. Using the lower-of-cost- or-market rule, inventory is to be restated at $1,200,000. Calway Corporation plans to exchange 18,000 of its shares for the 120,000 Jack shares. During June 2020, the fair value of a share of Calway Corporation is $270. Acquisition costs are $12,000. The stockholders’ equity account balances of Calway Corporation as of June 30, 2015, are as follows: Commonstock($10par)………………………………………… $2,000,000 Paid-incapitalinexcessofpar ……………………………………. Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Totalstockholders’equity ……………………………………….. 580,000 2,496,400 $5,076,400 Record the acquisition of Jack Company by Calway on July 1, 2020. Use value analysis to sup- port the acquisition entries.

1-6

Tweeden Corporation is contemplating the acquisition of the net assets of Sylvester Corporation in anticipation of expanding its operations. The balance sheet of Sylvester Corporation on December 31, 2011, is as follows:

 

Current Assets:Current Liabilities:

Notes Receivable$24,000Accounts Payable$45,000

Accounts Receivable$56,000Payroll/Benefits-Current $12,500

Inventory$31,000Debt Maturing in 1 year$10,000

Other current assets$18,000Other Liabilities:

Investments$65,000Long-term Debt$248,000

Fixed Assets:Payroll/Benefits-Long Term $156,000

Land$32,000Stockholders’ Equity:

Building$245,000 Common Stock$100,000

Equipment$387,000 Paid-in capital in $250,000

Intangibles: excess of par

Goodwill$45,000 Retained Earnings$114,000

Patents$23,000 Total L & E $936,000

Trade Names$10,000

Total Assets$936,000

 

An appraiser for Tweeden determined the fair values of Sylvester’s assets and liabilities to as follows:

 

AssetsLiabilities

Notes Receivable$24,000Accounts Payable$45,000

Accounts Receivable$56,000Payroll/Benefits-Current $12,500

Inventory$30,000Debt Maturing in 1 year$10,000

Other current assets$15,000Long-term Debt$248,000

Investments$63,000Payroll/Benefits-LT$156,000

Land$55,000

Building$275,000

Equipment$426,000

Goodwill—- 

Patents$20,000

Trade Names$15,000

 

 

The agreed upon purchase price is $580,000 in cash. Acquisition costs paid in cash total $20,000. Using the above information, do value analysis and prepare the entry on the books of Tweeden Corporation to acquire the net assets of Sylvester Corporation on December 31, 2011.

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