1. Trident Corporation acquires Uvell Company’s assets and liabilities for $40,0
ID: 2337604 • Letter: 1
Question
1. Trident Corporation acquires Uvell Company’s assets and liabilities for $40,000,000 in cash. At the date of acquisition, Uvell’s balance sheet reported assets of $90,000,000 and liabilities of $82,000,000. Investigation reveals that Uvell’s buildings are overvalued by $6,000,000 and it has unreported liabilities valued at $5,000,000.
What journal entry will Trident Corp record as a result of this acquisition?
2. An acquiring company pays $45 million in cash, and issues new no-par stock with a fair value of $75 million, to the acquired company’s former owners, for the assets and liabilities of the acquired company. Registration fees associated with the new stock issuance are $300,000, paid in cash. Consulting fees for the acquisition are $1 million, paid in cash. The fair value of the acquired company’s identifiable net assets is $65 million.
What entry does the acquiring company make to record the acquisition?
3. A company invests $300,000 in equity securities on November 30, 2019, and classifies them as investments with no significant influence. At December 31, 2019, the company’s year-end, the securities have a fair value of $310,000. On February 1, 2020, the company sells the securities for $295,000.
What is reported on the Balance Sheet and Income Statement regarding the securities for 2019 and 2020?
4. Precision Company acquires all of Springfield Company’s voting stock for $5,000,000 in cash. Information on Springfield's assets and liabilities at the date of acquisition is as follows:
Book Values
Current assets $ 500,000
Land, buildings and equipment (net) $2,000,000
Liabilities ($600,000)
Capital stock ($500,000)
Retained earnings ($1,400,000)
Fair Values
Current assets $700,000
Land, buildings and equipment (net) $3,500,000
Liabilities ($550,000)
Capital stock
Retained earnings
In addition, Springfield Company has unrecorded identifiable intangible assets, in the form of brand names and lease agreements, with a total estimated fair value of $400,000.
Prepare the eliminating entries
Explanation / Answer
1. Assets A/c. Dr. 84,000,000 ( Fair Value = 90,000,000-6,000,000)
Goodwill A/c Dr. 43,000,000 (Balancing Figure)
To Liabilities A/c. 82,000,000
To Unreported Liabilities A/c 5,000,000
To cash A/c 40,000,000
2. Net Assets A/c. Dr. 65,000,000
Goodwill A/c Dr. 56,300,000 ( Balancing Figure)
To Cash A/c. 46,300,000 (45,000,000+300,000+1,000,000)
To Common stock A/c. 75,000,000
3. Balance sheet as on 2019
CurrentAssets - Investments in Equity securities = 310000
Income statement for the year ended 2019
Unrealised gains on investments in equity securites = 10000
Balance sheet as on 2020
Current assets - Cash = 295000
Income statement for the year ended 2020
Realised loss on sale of investmens in equity securities = 15000
4. Land,Building & Equipments. Dr. 3,500,000
Current Assets Dr. 700,000
Identifiable Intangibles Dr. 400,000
Goowill Dr. 2,850,000
To liabilities 550,000
To Capital stock 500,000
To reatined earnings 1,400,000
To cash 5,000,000
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