Bigga Corporation purchased the net assets of Petit, Inc. on January 2, 2013 for
$380,000 cash and also paid $15,000 in direct acquisition costs. Petit, Inc. was
dissolved on the date of the acquisition. Petit’s balance sheet on January 2, 2013 was as
follows:
Fair values agree with book values except for inventory, land, and equipment, which
have fair values of $260,000, $35,000 and $35,000, respectively. Petit has patent rights
with a fair value of $20,000.
Required:
Prepare Bigga’s general journal entry for the cash purchase of Petit’s net assets.
The Leo, Mark and Natalie Partnership had the following capital balances and
profit/loss sharing percentages:
Newsome is going to buy into the partnership by paying $200,000 for a 20% ownership
in the partnership.
Required:
1.If Newsome pays the partnership directly, what are the four partner capital balances
immediately following Newsome’s admission to the partnership using the bonus
method? Assume the partnership assets are not revalued.
2.If Newsome pays the partnership directly, what are the four partner capital balances
immediately following Newsome’s admission to the partnership using the goodwill
method? Assume the partnership assets are revalued. The $200,000 amount paid by
Newsome is fair value for a 20% share of the partnership.
Alf, Bill, Cam, and Dot are partners who share profits and losses 30%, 20%, 35%, and
15%, respectively. The partnership will be liquidated gradually over several months
beginning January 1, 2014. The partnership trial balance at December 31, 2013 is as
follows:
Required:
Prepare a cash distribution plan for January 1, 2014, showing how cash installments
will be distributed among the partners as it becomes available. Prepare vulnerability
rankings for the partners and a schedule of assumed loss absorption.
On January 2, 2013 Palta Company issued 80,000 new shares of its $5 par value
common stock valued at $12 a share for all of Sudina Corporation’s outstanding
common shares. Palta paid $5,000 for the direct combination costs of the accountants.
Palta paid $18,000 to register and issue shares. The fair value and book value of
Sudina’s identifiable assets and liabilities were the same. Summarized balance sheet
information for both companies just before the acquisition on January 2, 2013 is as
follows:
Required:
1.Prepare Palta’s general journal entry for the acquisition of Sudina assuming that
Sudina survives as a separate legal entity.
2.Prepare Palta’s general journal entry for the acquisition of Sudina assuming that
Sudina will dissolve as a separate legal entity.
The following data relate to Falcon Corporation’s industry segments:
Required:
1. Which of Falcon’s operating segments would be considered reporting segments under
the “revenue” test?
2. Which of Falcon’s operating segments would be considered reporting segments under
the “asset” test?
Parrot Incorporated purchased the assets and liabilities of Sparrow Company at the
close of business on December 31, 2013. Parrot borrowed $2,000,000 to complete this
transaction, in addition to the $640,000 cash that they paid directly. The fair value and
book value of Sparrow’s recorded assets and liabilities as of the date of acquisition are
listed below. In addition, Sparrow had a patent that had a fair value of $50,000.
Required:
1.Prepare Parrot’s general journal entry for the acquisition of Sparrow, assuming that
Sparrow survives as a separate legal entity.
2.Prepare Parrot’s general journal entry for the acquisition of Sparrow, assuming that
Sparrow will dissolve as a separate legal entity.
