Question

estions, Circle your answers for the questions. Do not circle more than one answer for each question I PROBLEM QUESTIONS u Enterprises had the following book and market values: Market January 1, z20190raion acquired 100 percent of David Kalu Enterprises for $450,000 on At that date, Kal Book Cash and Receivables Inventory Equipment (net) Land Building (net) Liabilities $ 40,000 120,000 110,000 90,000 120,000 (160,000) (10,000) (270,000) S 40,000 140,000 125,000 130,000 145,000 (160,000) Common Stock Retained Earnings Prepare the worksheet elimination inj the acquisition date. ournal entry form to consolidate Dean and Kalu at (Deduct 3 points for each incorrect an

Answer 1

Answer :- Assumption - Assets of David Kalu Enterprises has been taken at Book Values.

Value of Purchase Consideration :- $450,000 (Given)

(1) Acquisition Analysis
= Value of Purchase Consideration - Value of Identifiable Net Assets
    = $450,000 - ($40,000+$120,000+$110,000+$90,000+$120,000 - $160,000)
= $130,000

Good will on acquisition :- $130,000

(2) Journal Entry

Retained Earnings A/c Dr. $270,000
Share Capital A/c Dr. $10,000
Goodwill A/c Dr. $130,000
To Investment in David Kalu Enterprises A/c $450,000