Question

Allerton Company acquires all of Deluxe Company’s assets and liabilities for cash on January 1, 2018, and subsequently formally dissolves Deluxe. At the acquisition date, the following book and fair values were available for the Deluxe Company accounts:

	Book Values				Fair Values
Current assets	$	60,000			$	60,000
Building		90,000				50,000
Land		10,000				20,000
Trademark		0				30,000
Goodwill		15,000				?
Liabilities		(40,000	)			(40,000	)
Common stock		(100,000	)
Retained earnings		(35,000	)

1&2. Prepare Allerton’s entry to record its acquisition of Deluxe in its accounting records assuming the following cash exchange amounts: $145,000 and $110,000. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Record the acquisition of Delex assuming the cash exchange of $145,000

	TransactionGeneral JournalDebitCredit1Current assetsBuildingLandTrademarkGoodwillLiabilitiesCash

Record the acquisition of Delex assuming the cash exchange of $110,000

	TransactionGeneral JournalDebitCredit2Current assetsBuildingLandTrademarkGain on bargain purchaseLiabilitiesCash

Answer 1

	Transaction General Journal Debit Credit 1 Current assets 60,000 Building 50,000 Land 20,000 Trademark 30,000 Goodwill 25,000 Liabilities 40,000 Cash 145,000

	Transaction General Journal Debit Credit 2 Current assets 60,000 Building 50,000 Land 20,000 Trademark 30,000 Gain on bargain purchase 10,000 Liabilities 40,000 Cash 110,000