Question

Answer to both parts of the question, "Prepare the acquisition entry and the balance sheet"

Post-Combination Balance Sheet: Merger and Stock Acquisition Presented below are the balance sheets of Allen Corporation and Benson Corporation, immediately prior to a business combina- tion. The fair values of Benson's reported net assets equal their book values, and previously unreported identifiable intangible assets have a fair value of $200.000 LO1 Allen Corp. Benson Corp. Cash. . 600,000 ..1,200,000 $2,800,000 50,000 150,000 400,000 Total assets . . . . .. . . $600,000 300,000 600,000 200,000 900,000 800,000 $100,000 250,000 100,000 Common stock Additional paid-in capital 50,000 100,000 $2,800,000 $600,000 Required a. Prepare the acquisition entry and the balance sheet of Allen Corporation after each of the following business combinations: (1) Allen acquires Benson for $800,000 cash in a transaction recorded as a merger. (2) Allen acquires Benson for $800,000 cash in a transaction recorded as a stock acquisition

Answer 1

1.

Journal Entries

	Debit	Credit	Notes
Other Current Assets	150,000
Property, Plant, Equipment	400,000
Intangible Assets	200,000
Goodwill	510,000		Balancing amount
Current Liabilites		100,000
Long Term Liabilities		250,000
Common Stock		10,000
Additional paid in capital		50,000
Retained Earnings		100,000
Cash		750,000	Net off $50,000 in Benson Corp

Balance Sheet

	Allen Corp	Acquisiotn Effect	Merged
Cash	1,000,000	(750,000)	250,000
Other Current Assets	600,000	150,000	750,000
Property, Plant, Equipment	1,200,000	400,000	1,600,000
Intangible Assets	-	200,000	200,000
Goodwill	-	510,000	510,000
Total			3,310,000
Current Liabilites	300,000	100,000	400,000
Long Term Liabilities	600,000	250,000	850,000
Common Stock	200,000	10,000	210,000
Additional paid in capital	900,000	50,000	950,000
Retained Earnings	800,000	100,000	900,000
Total			3,310,000

2.

Journal Entry

Investment in Benson (Dr) $800,000

To Cash (Cr) $800,000

Balance Sheet

Benson's balance sheet will remain same, there will be no change. Allen Corp's balance sheet will look like this

	Allen Corp	Acquisiotn Effect	Post Purchase BS
Cash	1,000,000	(800,000)	200,000
Other Current Assets	600,000		600,000
Property, Plant, Equipment	1,200,000		1,200,000
Intangible Assets	-		-
Investment in Benson	-	800,000	800,000
Total			2,800,000
Current Liabilites	300,000		300,000
Long Term Liabilities	600,000		600,000
Common Stock	200,000		200,000
Additional paid in capital	900,000		900,000
Retained Earnings	800,000		800,000
Total			2,800,000