Question

In a pre-2009 business combination, Acme Company acquired all of Brem Company’s assets and liabilities for cash. After the combination Acme formally dissolved Brem. At the acquisition date, the following book and fair values were available for the Brem Company accounts:

	Book Values			Fair Values
Current assets	$	81,800		$	81,800
Equipment		131,000			198,000
Trademark		0			352,000
Liabilities		(67,800	)		(67,800	)
Common stock		(100,000	)
Retained earnings		(45,000	)

In addition, Acme paid an investment bank $31,200 cash for assistance in arranging the combination.

1. Using the legacy purchase method for pre-2009 business combinations, prepare Acme’s entry to record its acquisition of Brem in its accounting records assuming the following cash amounts of $690,400 and $439,400 were paid to the former owners of Brem.
2. How would these journal entries change if the acquisition occurred post-2009 and therefore Acme applied the acquisition method?

Journal entry

• 1

  Record the acquisition of Brem using the purchase method assuming $690,400 was paid to the former owners of Brem

• 2

  Record the acquisition of Brem using the purchase method assuming $439,400 was paid to the former owners of Brem

• 3

  Record the acquisition of Brem using the acquisition method assuming $690,400 was paid to the former owners of Brem

• 4

  Record the expenses related to the combination using the acquisition method assuming $690,400 was paid to the former owners of Brem

• 5

  Record the acquisition of Brem using the acquisition method assuming $439,400 was paid to the former owners of Brem

• 6

• Record the expenses related to the combination using the acquisition method assuming $439,400 was paid to the former owners of Brem

Answer 1

Answer Page No 9 @ sehen se cash payment period to enter the scenes bo ksiloyDO Goodwill = ( cash amount + acquisition coola) - (fais value of net asta - (690400 + 31200) – (81800 + 198000 + 352000 -64800) . Credit : = 721600 - 564000 = $164600 General journal debit Current assets $81800 Equipment $198000 Prademark $ 352000 Goodwill $157600 licubilities Cash $67800 $7216001 198000 x 100 (198000 +352000 where the cash amount paid to former over 8431,400 Equipment - 198000 - 0 - 198000 - ( 93400X 367) Chile E = $.164346

Bargain purchase Page. No @ = ( 439400 + 31200) -(81800 + 198000 + 352000 – 67800 00 600 - 664000 = - $93400 Trademarila = 352000 352000 X 100 (93400 X 1920oc +359000 = 352000 - (93400 X 647.) = $292224 Cash = 439400 + 31200 = $ 440600 Gedit debit $81800 $164376 - General journal Current assets Equipment Trademark Liabilities cash. $992224 $64800 $470600

Credit Pageino eshen the cast amount paid to foren coners id $990400 Goodwill - Consideration transferred – (fair value of net anch) - acquired ? - (690400) – (81800 + 198000 + 352000 – 67 800) 3.690400 - 564000 = $ 126400 General journal debit Current assets $ 81800 Equipment $198000 Trademark $ 352000 Goodwill $ 126400 liabilitics $64800 Cash $ 690400 Ponofessional service expense $ 31200 cash $ 31200 may be como en el cash amaient paid to termine covers in 4.439400 Gain on bargain purchase = Consideration transferred – Pain value of net assets acquired

Page. No 4 = 4 39400 - (81800 + 198000 + 352000 - 67800) 439400 - 564000 = = - $ (24600 Credit General journal Current asselo : Equipment Trademark Gain on bargain purchase Liabilities Cash debit I $81800 $198000 $ 352000 $184600 of 67800 $439400 $ 31200 Professional service expense Cash $31200