Question

Prepare a consolidated balance sheet for Pratt and Spider as of December 31, 2018. 30. Allerton Company acquires all of Deluxe Company's assets and liabilities for cash on January 1. 2018, and subsequently formally dissolves Deluxe. At the acquisition date, the following book and fair values were available for the Deluxe Company accounts: Fair Values Book Values $ 60,000 90.000 10,000 -0- 15,000 (40,000) (100,000) (35,000) Current assets.... Building.............. Land............... Trademark ..... . Goodwill ........... Liabilities.......... Common stock ....... Retained earnings.... $ 60,000 50,000 20,000 30,000 (40,000) Prepare Allerton's entry to record its acquisition of Deluxe in its accounting records assuming the following cash exchange amounts: 1. $145,000 2. $110,000.

Answer 1

All the Assets and liabilities will be taken at book value from demergerd company.

Journal Entries: ( in the books of Allertion company)

1. When cash is paid $145,000.

Current Assets 60,000
Building 90,000
Land 10,000
Goodwill (b/f) 25,000
  
To Liabilities 40,000
To cash account 145,000
(Being consideration paid in cash).

2. When cash paid is $ 110,000

Current Assets 60,000
Building 90,000
Land 10,000

To Liabilities 40,000
To cash 110,000
To capital reserve (b/f) 10,000

Notes:
1. Trademark will not be taken as its book value is nil.
2. Goodwill is not transferred during acquiring of company in transferer company.
3. Consideration is paid in cash therefore , common stock and retained earnings will not be taken by Allertion company.