Merger and Stock Investment Saxton Corporation purchases all of Taylor Company’s assets and liabilities on January...

Merger and Stock Investment

Saxton Corporation purchases all of Taylor Company’s assets and liabilities on January 1, 2016, for $15 million in cash. At the date of acquisition, Taylor’s reported assets consist of current assets of $10 million and plant and equipment of $70 million. It reports current liabilities of $16 million and long-term debt of $58 million. Investigation reveals that Taylor’s plant and equipment is overvalued by $2 million and it has an unreported customer database valued at $700,000.

a. Prepare the necessary journal entry on Saxton's books to record its acquisition of Taylor on January 1, 2016.

Enter all of your answers in thousands. For example, $1 million = $1,000 or $700,000 = $700.

General Journal
Description	Debit	Credit
Current assets	Answer	Answer
Plant and equipment	Answer	Answer
Customer database	Answer	Answer
AnswerGoodwillCashInvestment in TaylorEquity in net income of TaylorRetained earnings	Answer	Answer
Current liabilities	Answer	Answer
Long-term debt	Answer	Answer
AnswerGoodwillCashInvestment in TaylorEquity in net income of TaylorRetained earnings	Answer	Answer

b. Assume that Saxton purchases all of Taylor's voting stock on January 1, 2016, for $15 million in cash. Prepare the necessary journal entry on Saxton's books to record the acquisition.

Enter all of your answers in thousands. For example, $1 million = $1,000 or $700,000 = $700.

General Journal
Description	Debit	Credit
AnswerGoodwillCashInvestment in TaylorEquity in net income of TaylorRetained earnings	Answer	Answer
AnswerGoodwillCashInvestment in TaylorEquity in net income of TaylorRetained earnings	Answer	Answer

Expert Solution

All working forms part of the answer
Requirement ‘a’

Assets acquired will be debited,
Liabilities acquired will be credited,
Cash paid will be credited.

Any difference between debit and credit side of journal after above treatment will be debited to Goodwill.

General Journal
Description	Debit	Credit
Current assets	$ 10,000.00
Plant and equipment [$ 70 million - $ 2 million overvalued]	$ 68,000.00
Customer database	$ 700.00
Answer: Goodwill	$ 10,300.00
Current liabilities		$ 16,000.00
Long-term debt		$ 58,000.00
Answer: Cash		$ 15,000.00

Requirement ‘b’

General Journal
Description	Debit	Credit
Answer: Investment in Taylor	$ 15,000.00
Answer: Cash		$ 15,000.00

ekkarill92 answered 1 year ago

Allerton Company acquires all of Deluxe Company’s assets and liabilities for cash on January 1, 2015,...

Allerton Company acquires all of Deluxe Company’s assets and liabilities for cash on January 1, 2015, 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 $ 41,500 $ 41,500 Building 108,000 67,000 Land 17,000 35,200 Trademark 0 31,800 Goodwill 19,000 ? Liabilities (50,500) (50,500) Common stock (100,000) Retained earnings (35,000) Prepare Allerton’s entry to record its acquisition of Deluxe...

Allerton Company acquires all of Deluxe Company’s assets and liabilities for cash on January 1, 2018,...

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 $ 61,000 $ 61,000 Building 91,750 44,650 Land 31,000 45,700 Trademark 0 37,600 Goodwill 15,000 ? Liabilities (63,750 ) (63,750 ) Common stock (100,000 ) Retained earnings (35,000 ) 1&2. Prepare Allerton’s entry to record its...

Saxton Corporation purchased 30 percent of Taylor Company’s voting stock on January 1, 2016, for $4...

Saxton Corporation purchased 30 percent of Taylor Company’s voting stock on January 1, 2016, for $4 million in cash. At the date of acquisition, Taylor reported its total assets at $80 million and its total liabilities at $74 million. Investigation revealed that Taylor’s plant and equipment (10-year life) was overvalued by $2 million and it had an unreported customer database (3-year life) valued at $700,000. Taylor declares and pays $150,000 in dividends and reports net income of $325,000 in 2019....

How does a corporation acquire another company through merger, buying assets or stock?

1. Trident Corporation acquires Uvell Company’s assets and liabilities for $40,000,000 in cash. At the date...

1. Trident Corporation acquires Uvell Company’s assets and liabilities for $40,000,000 in cash. At the date of acquisition, Uvell’s balance sheet reported assets of $90,000,000 and liabilities of $82,000,000. Investigation reveals that Uvell’s buildings are overvalued by $6,000,000 and it has unreported liabilities valued at $5,000,000. What journal entry will Trident Corp record as a result of this acquisition? 2. An acquiring company pays $45 million in cash, and issues new no-par stock with a fair value of $75 million,...

If total assets of Brooks Corporation are $100,000, total liabilities are $17,000, and capital stock is...

If total assets of Brooks Corporation are $100,000, total liabilities are $17,000, and capital stock is $20,000, how much are the retained earnings of Brooks Corporation?

oxx Corporation acquired all of Greenburg Company’s outstanding stock on January 1, 2019, for $586,000 cash....

oxx Corporation acquired all of Greenburg Company’s outstanding stock on January 1, 2019, for $586,000 cash. Greenburg’s accounting records showed net assets on that date of $440,000, although equipment with a 10-year remaining life was undervalued on the records by $56,500. Any recognized goodwill is considered to have an indefinite life. Greenburg reports net income in 2019 of $105,000 and $137,500 in 2020. The subsidiary declared dividends of $20,000 in each of these two years. Account balances for the year...

Foxx Corporation acquired all of Greenburg Company’s outstanding stock on January 1, 2019, for $666,000 cash....

Foxx Corporation acquired all of Greenburg Company’s outstanding stock on January 1, 2019, for $666,000 cash. Greenburg’s accounting records showed net assets on that date of $446,000, although equipment with a 10-year remaining life was undervalued on the records by $163,000. Any recognized goodwill is considered to have an indefinite life. Greenburg reports net income in 2019 of $132,000 and $113,000 in 2020. The subsidiary declared dividends of $20,000 in each of these two years. Account balances for the year...

Foxx Corporation acquired all of Greenburg Company’s outstanding stock on January 1, 2016, for $693,000 cash....

Foxx Corporation acquired all of Greenburg Company’s outstanding stock on January 1, 2016, for $693,000 cash. Greenburg’s accounting records showed net assets on that date of $558,000, although equipment with a 10-year life was undervalued on the records by $71,500. Any recognized goodwill is considered to have an indefinite life. Greenburg reports net income in 2016 of $97,000 and $135,500 in 2017. The subsidiary declared dividends of $20,000 in each of these two years. Account balances for the year ending...

Foxx Corporation acquired all of Greenburg Company’s outstanding stock on January 1, 2016, for $781,000 cash....

Foxx Corporation acquired all of Greenburg Company’s outstanding stock on January 1, 2016, for $781,000 cash. Greenburg’s accounting records showed net assets on that date of $586,000, although equipment with a 10-year life was undervalued on the records by $145,000. Any recognized goodwill is considered to have an indefinite life. Greenburg reports net income in 2016 of $95,500 and $128,000 in 2017. The subsidiary declared dividends of $20,000 in each of these two years. Account balances for the year ending...

Question