ABC Company acquired all of XYZ Corporation's assets andliabilities on June 30, 20X1. XYZ reported assets with abook value of P1,000,000 and liabilities of P550,000. ABCnoted that XYZ included the amount P70,000 for anobsolete inventory at the acquisition date that did notappear to have any value. ABC also determined that an oldmachine previously used by XYZ had a fair value ofP150,000 but had not been recorded by XYZ. Except formachinery and equipment, all the other assets andliabilities of XYZ approximated their fair values. In recordingthe transfer of assets and liabilities in its books, ABCrecorded goodwill of P420,000 and paid P1,050,000 toacquire XYZ's net assets. If the book value of XYZ'smachinery and equipment was P520,000, what was theirfair value? *Your answwer

The book value of assets is equal to its initial cost less any accumulated depreciation and…

bsolete inventory at the acquisition date that did not ppear to have any value. ABC also determined that an old nachine previously used by XYZ had a fair value of 150,000 but had not been recorded by XYZ. Except for nachinery and equipment, all the other assets and abilities of XYZ approximated their fair values. In recording he transfer of assets and liabilities in its books, ABC ecorded goodwill of P420,000 and paid P1,050,000 to cquire XYZ's net assets. If the book value of XYZ's hachinery and equipment was P520,000, what was their air value? *

bsolete inventory at the acquisition date that did not ppear to have any value. ABC also determined that an old nachine previously used by XYZ had a fair value of 150,000 but had not been recorded by XYZ. Except for nachinery and equipment, all the other assets and abilities of XYZ approximated their fair values. In recording he transfer of assets and liabilities in its books, ABC ecorded goodwill of P420,000 and paid P1,050,000 to cquire XYZ's net assets. If the book value of XYZ's hachinery and equipment was P520,000, what was their air value? *

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter12: Intangibles

Section: Chapter Questions

Problem 18E

See similar textbooks

Similar questions

On May 1, 2015, Zoe Inc. purchased Branta Corp. for $15,000,000 in cash. They only received $12,000,000 in net assets. In 2016, the market value of the goodwill obtained from Branta Corp. was valued at $4,000,000, but in 2017 it dropped to $2,000,000. Prepare the journal entry for the creation of goodwill and the entry to record any impairments to it in subsequent years.
Hamilton Companys balance sheet on January 1, 2019, was as follows: Korbel Company is considering purchasing Hamilton (a privately held company) and discovers the following about Hamilton: a. No allowance for doubtful accounts has been established. A 10,000 allowance is considered appropriate. b. Marketable securities are valued at cost. The current market value is 60,000. c. The LIFO inventory method is used. The FIFO inventory of 140,000 would be used if the company is acquired. d. Land, included in property, plant, and equipment, which is recorded at its cost of 50,000, is worth 120,000. The remaining property, plant, and equipment is worth 10% more than its depreciated cost. e. The company has an unrecorded trademark that is worth 70,000. f. The companys bonds are currently trading for 130,000. g. The pension liability is understated by 40,000. Required: 1. Compute the amount of goodwill if Korbel agrees to pay 500,000 cash for Hamilton. 2. Next Level What are the reasons that the book value of Hamiltons net identifiable assets differ from their market value? 3. Prepare the journal entry to record the acquisition on the books of Korbel assuming Hamilton is liquidated. 4. If Korbel agrees to pay only 400,000 cash, how much goodwill exists? 5. If Korbel pays only 400,000 cash, prepare the journal entry to record the acquisition on its books, assuming Hamilton is liquidated.
ABC Company acquired all of XYZ Corporation’s assets and liabilities on June 30, 20X1. XYZ reported assets with a book value of P1,000,000 and liabilities of P550,000. ABC noted that XYZ included the amount P70,000 for an obsolete inventory at the acquisition date that did not appear to have any value. ABC also determined that an old machine previously used by XYZ had a fair value of P150,000 but had not been recorded by XYZ. Except for machinery and equipment, all the other assets and liabilities of XYZ approximated their fair values. In recording the transfer of assets and liabilities in its books, ABC recorded goodwill of P420,000 and paid P1,050,000 to acquire XYZ’s net assets. If the book value of XYZ's machinery and equipment was P520,000, what was their fair value?
Tyra Company acquired all of Jay Corporation's assets and liabilities on June 30, 2021. Jay reported assets with a book value of P1,000,000 and liabilities of P550,000. Tyra noted that Jay included the amount P70,000 for an obsolete inventory at the acquisition date that did not appear to have any value. Tyra also determined that an old machine previously used by Jay had a fair value of P150,000 but had not been recorded by Jay. Except for machinery and equipment, all the other assets and liabilities of Jay approximated their fair values. In recording the transfer of assets and liabilities in its books, Tyra recorded a gain of P150,000 and paid P340,000 to acquire Jay's net assets. If the book value of Jay's machinery and equipment was P360,000, what was their fair value?
Niall Company acquired all of Ed Sheeran Corporation's assets and liabilities on June 30, 2021. Ed Sheeran reported assets with a book value of $1,000,000 and liabilities of $550,000. Niall noted that Ed Sheeran included the amount $70,000 for an obsolete inventory at the acquisition date that did not appear to have any value. Niall also determined that an old machine previously used by Ed Sheeran had a fair value of $150,000 but had not been recorded by Ed Sheeran. Except for machinery and equipment, all the other assets and liabilities of Ed Sheeran approximated their fair values. In recording the transfer of assets and liabilities in its books, Niall recorded a gain of $150,000 and paid $340,000 to acquire Ed Sheeran's net assets. If the book value of Ed Sheeran's machinery and equipment was $360,000, what was their fair value?
Ellen Company acquired all of Lil Wayne Corporation's assets and liabilities on June 30, 2021. Lil Wayne reported assets with a book value of $100,000 and liabilities of $55,000. Ellen noted that Lil Wayne included the amount $7,000 for an obsolete inventory at the acquisition date that did not appear to have any value. Ellen also determined that an old machine previously used by Lil Wayne had a fair value of $15,000 but had not been recorded by Lil Wayne. Except for machinery and equipment, all the other assets and liabilities of Lil Wayne approximated their fair values. In recording the transfer of assets and liabilities in its books, Ellen recorded a gain of $15,000 and paid $34,000 to acquire Lil Wayne's net assets. If the book value of Lil Wayne's machinery and equipment was $36,000, what was their fair value?
On March 1, 2010, JJ Corporation acquired for P 5,600,000 all of the assets of ZZ Company. On this date, the carrying value of ZZ’s identifiable assets was P4, 600,000. The current value of ZZ’s inventory was P800, 000 less than its carrying value, and the current fair value of ZZ’s plant assets was P1, 600,000 larger than its carrying amount. The current fair values of other identifiable net assets of ZZ were equal to their carrying values. The journal entry prepared by JJ to record the business combination includes a a. Debit of P 200,000 to goodwill. b. Debit of P 800,000 to inventories c. Debit of P 1,400,000 to goodwill d. Credit of P 1,600,000 to plant assets