Question

Williams Corporation pays cash of $250,000 to acquire the net assets of Frank Company on December 31, 20XX. The balance sheets of Williams Corporation and Frank Company, as well as the fair value information for Frank Company, is provided on an Excel spreadsheet (linked in Module folder).

1. Prepare the journal entry required by Williams Corporation when it acquires Frank Company’s net assets.
2. Prepare a balance sheet for William Corporation immediately following the acquisition of Frank Company.
3. Prepare the journal entry required by Williams Corporation if it acquires all of Frank Company’s common stock (instead of Frank Company’s net assets) for $250,000.

Williams Corporation
Balance Sheet-Book Value
December 31, 20XX
Cash		$    200,000		Accounts Payable	$    220,000
Accounts Receivable		175,000		Notes Payable	270,000
Inventory		220,000		Common Stock	200,000
Patents		140,000		Additional Paid-In Capital	160,000
Buildings and Equipment		530,000		Retained Earnings	225,000
Less: Accumulated Depreciation		(190,000)
		$ 1,075,000			$ 1,075,000

Frank Company
Balance Sheet-Book Value
December 31, 20XX
Cash	$        8,000		Accounts Payable	$      14,000
Accounts Receivable	20,000		Notes Payable	20,000
Inventory	20,000		Common Stock	20,000
Patents	10,000		Additional Paid-In Capital	16,000
Buildings and Equipment	100,000		Retained Earnings	38,000
Less: Accumulated Depreciation	(50,000)
	$    108,000			$    108,000
Frank Company
Balance Sheet-Fair Value
December 31, 20XX
Cash	$        8,000		Accounts Payable	$      14,000
Accounts Receivable	20,000		Notes Payable	20,000
Inventory	40,000		Common Stock
Patents	20,000		Additional Paid-In Capital
Buildings and Equipment	120,000		Retained Earnings

Answer 1