Question

Question 1

Fred Moss, owner of Monty Interiors Inc., is negotiating for the purchase of Grouper Galleries Ltd. The condensed statement of financial position of Grouper follows in an abbreviated form:

GROUPER GALLERIES LTD. Statement of Financial Position As at December 31, 2017
Assets				Liabilities and Shareholders’ Equity
Cash		$132,400		Accounts payable				$ 91,500
Land		69,100		Long-term notes payable				354,000
Building (net)		245,000		Total liabilities				445,500
Equipment (net)		184,800		Common shares		$213,000
Copyright (net)		98,300		Retained earnings		71,100		284,100
Total assets		$729,600		Total liabilities and shareholders’ equity				$729,600

Monty and Grouper agree that the land is undervalued by $40,200 and the business equipment is overvalued by $11,300. Grouper agrees to sell the business to Monty for $384,000.

Prepare the entry to record the purchase of the business’s net assets on Monty’s books. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Date	Account Titles and Explanation	Debit	Credit
Dec. 31, 2017

Answer 1

Date Account Titles and Explanation Debit Credit Dec. 31, 2017 Cash $ 132,400 Land ($69,100+$40,200) $ 109,300 Buildings $ 245,000 Equipment ($184,800-$11,300) $ 173,500 Copyrights $ 98,300 Goodwill $ 71,000 Accounts Payable $ 91,500 Long-term Notes Payable $ 354,000 Cash $ 384,000 (To record the purchase of the business's net assets)

B 1 Computation of net assets: 2 Cash 3 Land 4 Buildings 5 Equipment 6 Copyright 7 Accounts payable 8 Long-term notes payable 9 Net Assets $ 132,400 $ 109,300 $ 245,000 $ 173,500 $ 98,300 $ -91,500 $ -354,000 $ 313,000 10 $ 384,000 11 Purchase consideration: 12 Cash 13 14 Goodwill $ 71,000

A 1 Computation of net assets: 2 Cash 3 Land 4 Buildings 5 Equipment 6 Copyright 7 Accounts payable 8 Long-term notes payable 9 Net Assets 132400 =69100+40200 245000 =184800-11300 98300 -91500 -354000 =SUM(B2:38) 10 11 Purchase consideration: 12 Cash 384000 13 14 Goodwill =+B12-B9