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In: Accounting

December 31, 2017, Sallie Ltd. (Purchase) acquires all of the assets and liabilities of Jimmie Dean...

December 31, 2017, Sallie Ltd. (Purchase) acquires all of the assets and liabilities of Jimmie Dean Ltd. by issuing 40,000 Sallie common shares. Before the transaction, Sallie had 160,000 common shares outstanding. The market share of Sallie's stock is $30 with a par value of $10. After the transaction, 200,000 Sallie shares are outstanding, Jimmie Dean will dissolve. The pre-transaction balance sheets are the following:

Provide the appropriate journal entries and construct the new balance sheet for the surviving entity Sallie.

Sallie

Jimmie Dean

Fair Value Jimmie Dean

Cash

     1,000,000.00

            50,000.00

                            60,000.00

Accounts Recievable

     2,000,000.00

          150,000.00

                          140,000.00

Inventory

        200,000.00

            50,000.00

                            70,000.00

Land

     1,000,000.00

300,000

                          350,000.00

Builidings and Equipment

     3,000,000.00

          500,000.00

                          500,000.00

Accumulated Depreciation

   (1,200,000.00)

        (150,000.00)

                        (150,000.00)

Total Assets

     6,000,000.00

          900,000.00

Accounts Payble

     1,000,000.00

          100,000.00

                          100,000.00

Notes Payable

        400,000.00

          200,000.00

                          225,000.00

Common Shares

     1,600,000.00

            10,000.00

APIC

     1,000,000.00

          190,000.00

Retained Earnings

     2,000,000.00

          400,000.00

     6,000,000.00

          900,000.00

Solutions

Expert Solution

Journal Entries

For Business Purchase                                                                   Amount

Cash A/c                                                                                              Dr.          $60,000

Accounts Receivables A/c                                                            Dr.          $1,40,000

Inventory A/c                                                                                    Dr.          $70,000

Land A/c                                                                                              Dr.          $5,00,000

Building & Equipment                                                                    Dr.          $3,50,000

                To, Accounts Payable A/c                                             Cr.          $1,00,000

                To, Notes Payable A/c                                                   Cr.          $2,25,000

                To, Accumulated Depreciation A/c                           Cr.          $1,50,000

                To, Business Purchase A/c                                           Cr.          $6,45,000

(Being business purchase entry made)

For Consideration Paid                                                                 Amount

Business Purchase A/c                                                                   Dr.          $6,45,000

Goodwill A/c                                                                                      Dr.          $5,55,000

                To, Equity Share Capital A/c                                         Cr.          $4,00,000

                To, Share premium A/c                                                 Cr.          $8,00,000

(Consideration paid and goodwill account)

Assets

Consolidated

Cash

$           10,60,000.00

Accounts Receivable

$           21,40,000.00

Inventory

$             2,70,000.00

Goodwill

$             5,55,000.00

Land

$           13,50,000.00

Buildings and Equipment

$           35,00,000.00

Accumulated Depreciation

$         -13,50,000.00

Total Assets

$           75,25,000.00

Liabilities

Accounts Payable

$           11,00,000.00

Notes Payable

$             6,25,000.00

Common Shares

$           20,00,000.00

APIC

$           18,00,000.00

Retained Earnings

$           20,00,000.00

Total Liabilities

$           75,25,000.00

Consideration

Amount

Share issues

$        40,000.00

Fair Value

$ 12,00,000.00

Calculation of Net Assets

Amount

Cash

$        60,000.00

Accounts Recievable

$    1,40,000.00

Inventory

$        70,000.00

Land

$    3,50,000.00

Building and Equipment

$    3,50,000.00

Total Assets

$    9,70,000.00

Less

Accounts Payable

$    1,00,000.00

Less

Notes Payable

$    2,25,000.00

Net Assets

$    6,45,000.00

Calculation of Goodwill

Amount

Consideration Paid

$ 12,00,000.00

Net Assets Acquired

$    6,45,000.00

Goodwill

$    5,55,000.00

ekkarill92 answered 2 years ago
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