Business
Engineering
Math
Science
Social Science
Intermediate Accounting: Reporting...
Solutions
Intermediate Accounting: Reporting...
Hamilton Company’s 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 company’s 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 Hamilton’s 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 $400,000 cash, prepare the journal entry to record the acquisition on its books, assuming Hamilton is liquidated.
1.
Calculate the amount of goodwill of Company H.
Goodwill: Goodwill is the good reputation developed by a company over years. This is recorded as an intangible asset, and is quantified when other company acquires. Goodwill should be recorded only when one company is acquired by another company. Goodwill value would be impaired, if the book value of goodwill is less than fair market value.
Calculate the amount of goodwill of Company H:
| Particulars | Amount ($) |
| Amount willing to pay | $500,000 |
| Less: Identifiable net assets | $415,000 |
| Goodwill | $85,000 |
Table (1)
Compute the identifiable net assets:
| Assets | Amount ($) |
| Cash | $30,000 |
| Accounts receivable (net) (1) | 70,000 |
| Marketable securities (short-term) | 60,000 |
| Inventory | 140,000 |
| Land | 120,000 |
| Plant Property &Equipment (2) | 165,000 |
| Trademark | 70,000 |
| Total assets (a) | $655,000 |
| Liabilities | Â |
| Accounts payable | 20,000 |
| Bonds payable | 130,000 |
| Pension liability | 90,000 |
| Total liabilities (b) | $240,000 |
| Identifiable net assets |
2.
State the reason for the difference in the book value of Company H’s identifiable net assets from the market value.
3.
Prepare journal entry for the given transaction.
4.
Compute the amount of goodwill that exist, when Company K agrees pay only $400,000 cash.
5.
Prepare journal entry for the given transaction.
Chapter 12 Solutions
Additional Business Solutions
Find more solutions based on key concepts
Show solutions addStone Inc. is a company that purchases goods (e.g., chess sets, pottery) from overseas and resells them to gift...
Managerial Accounting: The Cornerstone of Business Decision-Making
Internal controls One of the largest losses in history from unauthorized securities trading involved a securiti...
Financial And Managerial Accounting
The ability to earn a satisfactory return on investments is called (a) liquidity. (b) profitability. (c) levera...
College Accounting, Chapters 1-27
Ethics in Action CLG Capital Inc. is a large holding company that uses long-term debt extensively to fund its o...
Corporate Financial Accounting
Would the use of standards be appropriate in a non-manufacturing setting, such as a fast-food restaurant?
Financial & Managerial Accounting
Each of the following is a necessary element for the successful warehousing of data EXCEPT a. cleansing extract...
Accounting Information Systems
Transactions related to revenue and cash receipts completed by Crowne Business Services Co. during the period A...
Financial Accounting
In an hour, Mateo can wash 2 cars or mow 1 lawn, and Tyler can wash 3 cars or mow 1 lawn. Who has the absolute ...
Principles of Macroeconomics (MindTap Course List)
The context diagram in Figure 16.4 (pg. 626) shows the data flows running to the GL from the feeder processes s...
Accounting Information Systems
INTEREST RATE DETERMINATION Maria Juarez is a professional tennis player, and your firm manages her money. She ...
Fundamentals of Financial Management (MindTap Course List)
Refer to Table 1.6. a. What is the average cost for the tablets? b. Compare the average cost of tablets with a ...
STATISTICS F/BUSINESS+ECONOMICS-TEXT
Draw a diagram depicting a firm that is making a profit in a monopolistically competitive market. Now show what...
Principles of Economics (MindTap Course List)
Contrast the focus of marketing activities during the five eras of marketing history.
Contemporary Marketing
(Total Cost and Marginal Cost) Complete the following table, assuming that each unit of labor costs $75 per day...
ECON: MICRO4 (New, Engaging Titles from 4LTR Press)
A firm has a 100 million capital budget. It is considering two projects, each costing 100 million. Project A ha...
Fundamentals of Financial Management, Concise Edition (MindTap Course List)
Which goods will a nation typically import? a. those goods in which the nation has an absolute advantage b. tho...
Principles of Microeconomics (MindTap Course List)
Rate each of the following questions according to the Following scale: I am never like this. I am rarely like t...
Management, Loose-Leaf Version
Identify the various ways of entering the global marketplace
MKTG 12:STUDENT ED.-TEXT
What reasons are generally given for imposing trade restrictions?
Foundations of Business (MindTap Course List)
The company that you manage has invested 5 million in developing a new product, but the development is not quit...
Brief Principles of Macroeconomics (MindTap Course List)
An economy produces hot dogs and hamburgers. If a discovery of the remarkable health benefits of hot dogs were ...
Essentials of Economics (MindTap Course List)
3 Request Refusal: Rising Phoenix Team Sinks Application (L.O.1-4) E-Mail Web Adobe Systems Incorporated is kno...
Essentials of Business Communication (MindTap Course List)
The following transactions were completed by Yang Restaurant Equipment during January, the first month of this ...
College Accounting (Book Only): A Career Approach
A business using the retail method of inventory costing determines that merchandise inventory at retail is 396,...
Financial Accounting
Entries for notes receivable, including year-end entries The following selected transactions were completed by ...
Financial & Managerial Accounting
PREPARE CHECK AND STUB Based on the following information, prepare a check and stub:
College Accounting, Chapters 1-27 (New in Accounting from Heintz and Parry)
a. Why is it advantageous to have a high inventory turnover? b. Is it possible to have a high inventory turnove...
Accounting (Text Only)
Place a check mark in the column that indicates the location of each item that would be found on a bank reconci...
College Accounting (Book Only): A Career Approach
Human Resources department needs the work time, vacation time, and sick time for Greg Kinman (see the EMPLOYEE ...
Pkg Acc Infor Systems MS VISIO CD
Would each of the following increase, decrease, or have an indeterminant effect on a firm's break-even point (u...
Fundamentals of Financial Management (MindTap Course List)
The following table shows the supply schedules for Rolling Rock and two other petroleum companies. Armadillo oi...
Exploring Economics
RISK AND RETURN Assume that you recently graduated with a major in finance. You just landed a job as a financia...
Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)
The FinancialTimes/Harris Poll is a monthly online poll of adults from six countries in Europe and the United S...
Statistics for Business & Economics, Revised (MindTap Course List)
In what sense is economics like a science? Draw a production possibilities frontier for a society that produce...
Principles of Macroeconomics (MindTap Course List)
Long-term solvency analysis The following information was taken from Charu Company's balance sheet: Fixed asset...
Corporate Financial Accounting
Process yield Perez Inc. manufactures various types of furniture including couches, tables, and chairs. During ...
Survey of Accounting (Accounting I)
During the first full week of 2020, the Payroll Department of Quigley Corporation is preparing the Forms W-2 fo...
PAYROLL ACCT.,2019 ED.(LL)-TEXT
Most actions or practices of labor unions are attempts to affect one of three factors. What are they?
Microeconomics
Do buyers prefer lower prices to higher prices?
Economics (MindTap Course List)
A CPA would recommend changing from plantwide overhead rate application to departmental rates under which of th...
Cornerstones of Cost Management (Cornerstones Series)
Briefly discuss each of the seven periods in the evolution of purchasing and supply management. What do you for...
Purchasing and Supply Chain Management
Draw a graph to demonstrate your answer to question 6.
Economics For Today
