Saxton Corporation purchases all of Taylor Company's assets and liabilities on January 1, 2013, for $60 million in cash. At the date of acquisition, Taylor's reported assets consist of current assets of $50 million and plant and equipment of $250 million. It reports current liabilities of $80 million and long-term debt of $200 million. Investigation reveals that Taylor's plant and equipment is overvalued by $9 million and it has an unreported customer database valued at $2.5 million.
a. Prepare the necessary journal entry on Saxton's books to record its acquisition of Taylor on January 1, 2013.
Enter your answers in thousands. For example, $1 million = $1,000 or $500,000 = $500.
| General Journal | ||
|---|---|---|
| Description | Debit | Credit |
| Current assets | Answer | Answer |
| Plant and equipment | Answer | Answer |
| Customer database | Answer | Answer |
| AnswerGoodwillCashInvestment in TaylorEquity in net income of TaylorRetained earnings | Answer | Answer |
| Current liabilities | Answer | Answer |
| Long-term debt | Answer | Answer |
| AnswerGoodwillCashInvestment in TaylorEquity in net income of TaylorRetained earnings | Answer | Answer |
b. Assume that Saxton purchases all of Taylor's voting stock on January 1, 2013, for $60 million in cash. Prepare the necessary journal entry on Saxton's books to record the acquisition.
Enter your answers in thousands. For example, $1 million = $1,000 or $500,000 = $500.
| General Journal | ||
|---|---|---|
| Description | Debit | Credit |
| AnswerGoodwillCashInvestment in TaylorEquity in net income of TaylorRetained earnings | Answer | Answer |
| AnswerGoodwillCashInvestment in TaylorEquity in net income of TaylorRetained earnings | Answer | Answer |
Homework Answers
| a. Prepare the necessary journal entry on Saxton's books to record its acquisition of Taylor on January 1, 2013. | ||
| General Journal | ||
| Description | Debit | Credit |
| Current assets | $ 50,000.00 | |
| Plant and equipment ($250 - $9) Million | $ 241,000.00 | |
| Customer database | $ 2,500.00 | |
| Goodwill | $ 46,500.00 | |
| Current liabilities | $ 80,000.00 | |
| Long-term debt | $ 200,000.00 | |
| Cash | $ 60,000.00 | |
| b. Assume that Saxton purchases all of Taylor's voting stock on January 1, 2013, for $60 million in cash. Prepare the necessary journal entry on Saxton's books to record the acquisition. | ||
| General Journal | ||
| Description | Debit | Credit |
| Investment in Taylor | $ 60,000.00 | |
| Cash | $ 60,000.00 |
Add Answer to:
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