Question

Parkland buys all of Sander Company's assets and liabilities. Sander' balance sheet at the date of acquisition, including fair value information on its reported assets and liabilities, is as follows: Book Value Dr (Cr) Fair Value Dr (Cr) Assets Cash, receivables Inventories Property and equipment Total assets $ 1,000,000 5,000,000 60.000.000 $ 66,000,000 $ 950,000 4,000,000 45,000,000 29,000,000 Liabilities & Equity Accounts and notes payable Common stock Additional paid-in capital Retained earnings Total liabilities and equity $ 30,000,000 500,000 15,000,000 20.500,000 $ 66,000,000 Assets and liabilities attributed to Sander, not currently reported on its books are: Favorable leaseholds Brand names In-process R&D Warranty liabilities Fair value $ 3,000,000 9,500,000 1,000,000 1,800,000 In addition, a deferred tax liability of $2,000,000 is recognized as part of the acquisition. The acquisition terms are as follows: Parkland paid Sander' shareholders a total of $25.000.000 in cash. • Parkland issued a total of 2.000.000 new shares of its common stock to Sander' shareholders. Parkland's shares have a par value of $1/ share and a total fair value of $92,000,000. • Parkland paid $900,000 in cash for registration fees to issue the shares. • Parkland paid $1,000,000 to a brokerage company for merger advertisement, all paid in cash. Using the attached T-account template, prepare the journal entry to record this acquisition on Parkland's books.

Answer 1

Parkland's Book:
Journal Entry towards acquisition:
Accounts Title	Debit $	Credit $
Cash & Receivables	950000
Inventories	4000000
Property and equipment	45000000
Favorable leaseholds	3000000
Brand names	9500000
In-process R&D	1000000
Registration Fees exp.	900000
Brokerage Fees exp.	1000000
Goodwill	58350000
Accounts & Notes payable		2900000
Warranty liabilities		1800000
Deferred tax liablility		2000000
Cash		25000000
Common Stock		2000000
Additional Paid in capital		90000000
(Assets and liabilities acquired and acquisition
amount paid in cash and stock. Goodwill created)