On June 30, 2018, Streeter Company reported the following account balances:
Receivables | $ | 64,000 | Current liabilities | $ | (11,500 | ) | ||
Inventory | 94,000 | Long-term liabilities | (74,000 | ) | ||||
Buildings (net) | 86,500 | Common stock | (90,000 | ) | ||||
Equipment (net) | 31,000 | Retained earnings | (100,000 | ) | ||||
Total assets | $ | 275,500 | Total liabilities and equities | $ | (275,500 | ) | ||
On June 30, 2018, Princeton Company paid $311,500 cash for all assets and liabilities of Streeter, which will cease to exist as a separate entity. In connection with the acquisition, Princeton paid $7,700 in legal fees. Princeton also agreed to pay $59,200 to the former owners of Streeter contingent on meeting certain revenue goals during 2019. Princeton estimated the present value of its probability adjusted expected payment for the contingency at $17,000.
In determining its offer, Princeton noted the following pertaining to Streeter:
Note: Enter debits before credits.
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Note: Enter debits before credits.
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Answer:
The following entries will be prepared to record the combination:
Transaction | Particulars | Debit ($) | Credit ($) |
1 | Accounts Receivable | 64000 | |
Inventory | 94000 | ||
Buildings (86500+42100) | 128600 | ||
Equipment | 31000 | ||
Customers List | 21000 | ||
Research and Development | 39400 | ||
Goodwill | 36000 | ||
Current Liabilities | 11500 | ||
Long term Liabilities | 74000 | ||
Contingent Liability | 17000 | ||
Cash | 311500 | ||
(To record assets and liabilities acquired and consideration paid) | |||
2 | Professional Service fees expenses | 7700 | |
Cash | 7700 | ||
(To record legal fees paid in connection to the acquisition.) |
Working Note:
Accquisition cost | 311500 | |
Contingnet obligation performance | 17000 | |
Total acquisition cost | 328500 | |
Less: Fair value of streetor company | ||
Receivables | 64000 | |
Inventory | 94000 | |
Buildings (86500+42100) | 128600 | |
Equipment | 31000 | |
Customer list | 21000 | |
Capitalized R &D | 39400 | |
Current liabilities | (11500) | |
Long term liabilities | (74000) | 292500 |
Goodwill | 36000 |
On June 30, 2018, Streeter Company reported the following account balances: Receivables $ 64,000 Current liabilities...
On June 30, 2021, Streeter Company reported the following account balances: Receivables Inventory Buildings (net) Equipment (net) Total assets $ 64,000 Current liabilities 94,000 Long-term liabilities 86,500 Common stock 31,000 Retained earnings $ 275,500 Total liabilities and equities $ (11,500) (74,000) (90,000) (100,000) $ (275,500) On June 30, 2021, Princeton Company paid $311,500 cash for all assets and liabilities of Streeter, which will cease to exist as a separate entity. In connection with the acquisition, Princeton paid $7,700 in legal...
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