Bagley Incorporated’s statement of financial position as at July 31, Year 4, is as follows: BAGLEY...
Bagley Incorporated’s statement of financial position as at July 31, Year 4, is as follows:
| BAGLEY INCORPORATED STATEMENT OF FINANCIAL POSITION At July 31, Year 4 |
|||||
| Carrying Amount |
Fair Value |
||||
| Plant and equipment (net) | $ | 910,000 | $ | 1,053,000 | |
| Patents | - | 78,000 | |||
| Current assets | 455,000 | 507,000 | |||
| $ | 1,365,000 | ||||
| Ordinary shares | $ | 182,000 | |||
| Retained earnings | 520,000 | ||||
| Long-term debt | 390,000 | 416,000 | |||
| Current liabilities | 273,000 | 273,000 | |||
| $ | 1,365,000 | ||||
On August 1, Year 4, the directors of Bagley considered a takeover offer from Davis Inc., whereby the corporation would sell all of its assets and liabilities. Davis’s costs of investigation and drawing up the merger agreement would amount to $19,500.
Required:
(a) Assume that Davis made a $1,040,000 cash payment to Bagley for its net assets. Prepare the journal entries in the accounting records of Davis to record the business combination. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)
Transcation 1: Record the acquisition of net assets of Bagley Incorporated in Davis Inc's books.
Transcation 2 : Record the $19,500 cash paid for professional fees expense.
(b) Assume that Davis issued 130,000 ordinary shares, with a market value of $8.00 per share, to Bagley for its net assets. Legal fees associated with issuing these shares amounted to $6,500 and were paid in cash. Davis had 150,000 shares outstanding prior to the takeover.
(i) Prepare the journal entries in the records of Davis to record the business combination. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)
Transcation 1 : Record the acquisition of net assets of Bagley Incorporated in Davis Inc's books.
Transcation 2 : Record the payment of $6,500 legal fees for the issue of 130,000 equity shares at a market value of $8.00 per share.
Transcation 3 : Record the $21,000 cash paid for professional fees expense.
(ii) Prepare the statement of financial position of Bagley immediately after the sale.
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Bagley Incorporated’s statement of financial position as at July
31, Year 4, is as follows:
BAGLEY...
Bagley Incorporated’s statement of financial position as at July 31, Year 4, is as follows: BAGLEY...
Bagley Incorporated’s statement of financial position as at July 31, Year 4, is as follows: BAGLEY INCORPORATED STATEMENT OF FINANCIAL POSITION At July 31, Year 4 Carrying Amount Fair Value Plant and equipment (net) $ 919,000 $ 1,062,000 Patents - 87,000 Current assets 464,000 516,000 $ 1,383,000 Ordinary shares $ 192,000 Retained earnings 511,000 Long-term debt 399,000 425,000 Current liabilities 282,000 282,000 $ 1,383,000 On August 1, Year 4, the directors of Bagley considered a takeover offer from Davis Inc.,...
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June 30, 2016, follows.
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Statement of Net Position
June 30, 2016
Assets
Cash
$
341,000
Accounts receivable (net of doubtful accounts of
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395,000
Investments
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Capital assets
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These financial statement items are for Crane Corporation at
year end, July 31, 2018:
Operating expenses
$32,500
Interest payable
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Salaries expense
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Supplies expense
1,700
Unearned revenue
12,000
Dividends declared
12,500
Utilities expense
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Depreciation expense
2,800
Equipment
61,700
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20,440
Accounts payable
4,720
Rent expense
11,000
Service revenue
115,100
Income tax expense
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Supplies
1,600
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