Advanced Accounting
14th Edition
ISBN: 9781260247824
Author: Joe Ben Hoyle, Thomas F. Schaefer, Timothy S. Doupnik
Publisher: RENT MCG
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Alfonso Inc. acquired 100 percent of the voting shares of BelAire Company on January 1, 2020. In exchange, Alfonso paid $326,750 in cash and issued 100,000 shares of its own $1 par value common stock. On this date, Alfonso’s stock had a fair value of $15 per share. The combination is a statutory merger with BelAire subsequently dissolved as a legal corporation. BelAire’s assets and liabilities are assigned to a new reporting unit.
The following shows fair values for the BelAire reporting unit for January 1, 2020 along with respective carrying amounts on December 31, 2021.
BelAire Reporting Unit
Fair Values1/1/20
Carrying Amounts12/31/21
Cash
$
99,500
$
51,500
Receivables
196,000
246,500
Inventory
215,000
261,500
Patents
731,000
840,500
Customer relationships
617,250
590,000
Equipment (net)
322,500
241,000
Goodwill
?
436,000
Accounts payable
(176,000
)
(256,000
)
Long-term liabilities
(614,500
)…
Alfonso Inc. acquired 100 percent of the voting shares of BelAire Company on January 1, 2020. In exchange, Alfonso paid $263,500 in
cash and issued 100,000 shares of its own $1 par value common stock. On this date, Alfonso's stock had a fair value of $15 per share.
The combination is a statutory merger with BelAire subsequently dissolved as a legal corporation. BelAire's assets and liabilities are
assigned to a new reporting unit.
The following shows fair values for the BelAire reporting unit for January 1, 2020 along with respective carrying amounts on December
31, 2021.
BelAire Reporting Unit
Cash
Receivables
Inventory
Patents
Customer relationships
Equipment (net)
Goodwill
Accounts payable
Long-term liabilities
Note: Parentheses indicate credit balance.
Fair Values
1/1/20
68,000
182,500
219,000
$
371,500
603,500
404,500
?
(123,500)
(524,000)
Carrying Amounts
$
12/31/21
41,000
236,000
251,000
467,000
574,000
339,000
562,000
(188,000)
(452,000)
a. Prepare Alfonso's journal entry to…
Alfonso Inc. acquired 100 percent of the voting shares of BelAire Company on January 1, 2020. In exchange, Alfonso paid $461,000 in
cash and issued 100,000 shares of its own $1 par value common stock. On this date, Alfonso's stock had a fair value of $15 per share.
The combination is a statutory merger with BelAire subsequently dissolved as a legal corporation. BelAire's assets and liabilities are
assigned to a new reporting unit.
The following shows fair values for the BelAire reporting unit for January 1, 2020 along with respective carrying amounts on December
31, 2021.
TT
Fair Values
1/1/20
$
Carrying Amounts
BelAire Reporting Unit
Cash
12/31/21
$
89,000
189,750
218,750
776, 500
586,000
355,000
48,000
243,000
258,000
860,000
546,000
269,000
452,000
(184,000)
(518,000)
Receivables
Inventory
Patents
Customer relationships
Equipment (net)
Goodwill
Accounts payable
Long-term liabilities
(114,500)
(591,500)
Note: Parentheses indicate a credit balance.
a. Prepare Alfonso's journal entry…
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