Question

Problem 2 Norton Corporation has agreed to acquire the net assets of Payco Corporation. Just prior to the acquisition, Payco's balance sheet was as follows: Payco Corporation Balance Sheet January 1, 20X1 Assets Liabilities and Equity $233,300 Accounts receivable............ $234,100 Inventory 78,900 Equipment (net). 90,250 Land 70,100 Buildings 29.900 Total assets.. $503 250 Current liabilities...........$ 69,100 Mortgage payable.......... 164,200 Stockholders' equity: Common stock ($10par) $122,700 Retained carnings...... 147.250 Total liabilities and equity 269.950 $503 250 Fair values of net assets are as follows: Accounts receivable Inventory Land Buildings Equipment Copyrights Current liabilities Mortgage payable $212,800 72,900 100,300 41,100 78,400 21,300 67,500 151,800 Norton Corporation paid $18,500 in acquisition costs to consummate the transaction. Record the acquisition on the books of Norton Corporation assuming the cash paid to Payco Corporation was $267,800 Suggestion: Use value analysis to guide your calculations and entries.

Answer 1

Norton Corporation Value Analysis: 267800 Price Paid FMV of Net assets acquired: Accounts Receivable Inventory Land Building Equipment Copyright Current Liabilities Mortgage Payable Gain 212800 72900 100300 41100 78400 21300 -67500 -151800 1 Journal Enteries Trans. Particulars 1 Accounts Receivable a/c Inventory a/c Land a/c Building a/c Equipment a/c Copyright a/c To Current Liabilities To Mortgage Payable To Cash To Gain on Acquisition Debit in $ Credit in $ 212800 72900 100300 41100 78400 21300 67500 151800 267800 39700 307500 -39700 2 Dr. 18500 Acquisition Expense a/c To Cash 18500