Advanced Accounting Part 2

Chapter 14

Problem 3

Consideration transferred
Cash 50,000
Common (30,000 * 25) 750,000
Preferred (15,000 *100) 1,500,000
Total 2,300,000
Less: Acquired Company net assets at Fair Value
Accounts receivable 198,000
Inventory 330,000
Land 550,000
Building and equipment 1,144,000
Total 2,222,000
Less: Liabilities
Current liabilities 275,000
Bonds Payable, 10% 495,000 770,000 1,452,000
Goodwill 848,000

Journal entries:
Book of Pretzel Company

Accounts receivable, not NRV 231,000

Inventory 330,000
Land 550,000
Building and equipment 1,144,000
Goodwill 848,000
Allowance for doubtful accounts (231,000 - 198,000) 33,000
Current liabilities 275,000
Bonds Payable, 10% 495,000
Common stock 300,000
Premium on common stock 450,000
Preferred stock 1,500,000
Cash 50,000

Book of Salt Company - suggested

Inventory 55,000
Land 154,000
Allowance for doubtful accounts 22,000
Bonds Payable 45,000
Gain on revaluation 142,000
Cash 50,000
Investment in Pretzel Co. common stock 750,000
Investment in Pretzel Co. preferred stock 1,500,000
Current liabilities 275,000
Bonds Payable, 10% 495,000
Allowance for doubtful accounts 33,000
Accounts receivable 231,000
Inventory 330,000
Land 550,000
Building and equipment 1,144,000
Gain on sale 848,000

Gain on revaluation 142,000

Gain on sale 848,000
Retained earnings 990,000

Common stock 770,000

Other contributed capital 396,000
Retained earnings (309,000 + 990,000) 1,299,000
Cash (50,000 +165,000) 215,000
Investment in Pretzel Co. common stock 750,000
Investment in Pretzel Co. preferred stock 1,500,000