Question

In: Accounting

On January 1, 2016, Asure Corporation acquires the net assets of BlueBox Inc. and records the...

On January 1, 2016, Asure Corporation acquires the net assets of BlueBox Inc. and records the acquisition as a merger. Asure/s acquisition entry looks like this (amounts in thousands):

General Journal
Description Debit Credit
Current assets 12,000
Plant and equipment 40,000
Identifiable intangibles 80,000
Goodwill 700,000
Notes payable 100,000
Cash 700,000
Earnings contingency liability 32,000


Brand names and customer lists comprise the identifiable intangibles.


Required
For each of the following independent situations, prepare Asure's journal entry, if any, to record the information (amounts are in thousands).


a. On March 1, 2016, Asure receives information that the appraiser of BlueBox's plant and equipment was not qualified. A new appraiser values BlueBox's plant and equipment at $30,000 as of the date of acquisition. If no journal entry is required, select "No entry" as the journal description(s).

General Journal
Description Debit Credit
AnswerGoodwillPlant and equipmentLoss on inventory (income)InventoryLoss on equipment (income)Loss on earnout (income)Gain on earnout (income)Earnings contingency liabilityBrand namesGain on brand names (income)No entry Answer Answer
AnswerGoodwillPlant and equipmentLoss on inventory (income)InventoryLoss on equipment (income)Loss on earnout (income)Gain on earnout (income)Earnings contingency liabilityBrand namesGain on brand names (income)No entry Answer Answer


b. On January 17, 2017, Asure learns that inventory mistakenly valued at $1,000 at the date of acquisition was really worth $400 at that time.

General Journal
Description Debit Credit
AnswerGoodwillPlant and equipmentLoss on inventory (income)InventoryLoss on equipment (income)Loss on earnout (income)Gain on earnout (income)Earnings contingency liabilityBrand namesGain on brand names (income)No entry Answer Answer
AnswerGoodwillPlant and equipmentLoss on inventory (income)InventoryLoss on equipment (income)Loss on earnout (income)Gain on earnout (income)Earnings contingency liabilityBrand namesGain on brand names (income)No entry Answer Answer


c. On June 15, 2016, BlueBox's equipment, acquired by Asure, was damaged in a fire. The amount of damage is $4,000.

General Journal
Description Debit Credit
AnswerGoodwillPlant and equipmentLoss on inventory (income)InventoryLoss on equipment (income)Loss on earnout (income)Gain on earnout (income)Earnings contingency liabilityBrand namesGain on brand names (income)No entry Answer Answer
AnswerGoodwillPlant and equipmentLoss on inventory (income)InventoryLoss on equipment (income)Loss on earnout (income)Gain on earnout (income)Earnings contingency liabilityBrand namesGain on brand names (income)No entry Answer Answer


d. On September 22, 2016, Asure determines that because of an increase in demand for BlueBox's products since the date of acquisition, the brand names recorded at the date of acquisition have increased in value by $3,000. In addition, the earnout agreement's fair value has increased by $2,000.

General Journal
Description Debit Credit
AnswerGoodwillPlant and equipmentLoss on inventory (income)InventoryLoss on equipment (income)Loss on earnout (income)Gain on earnout (income)Earnings contingency liabilityBrand namesGain on brand names (income)No entry Answer Answer
AnswerGoodwillPlant and equipmentLoss on inventory (income)InventoryLoss on equipment (income)Loss on earnout (income)Gain on earnout (income)Earnings contingency liabilityBrand namesGain on brand names (income)No entry Answer Answer
To record increase in fair value of brand names.
AnswerGoodwillPlant and equipmentLoss on inventory (income)InventoryLoss on equipment (income)Loss on earnout (income)Gain on earnout (income)Earnings contingency liabilityBrand namesGain on brand names (income)No entry Answer Answer
AnswerGoodwillPlant and equipmentLoss on inventory (income)InventoryLoss on equipment (income)Loss on earnout (income)Gain on earnout (income)Earnings contingency liabilityBrand namesGain on brand names (income)No entry Answer Answer
To record increase in fair value of earnout.

Solutions

Expert Solution

ASURE CORPORATION

General Journal

Solution (a)

Loss on Equipments Dr 10000

To Plant & Equipments 10000

(Value of plant & eqquipments decreased in books due to revaluation

and revaluation loss charged as expences in absence of any revaluation reserve)

Solution (b)

Loss on Inventory Dr 600

To Inventory 600

(Loss on inventory due to valuation charged as expences and value of

inventory decreased)

Solution (c)

Loss on Equipments Dr 4000

To Plant & Equipment 4000

(Loss on equipment on account of Fire is charged and

value of plant & euipment decreased)

Solution (d i )

Brand Names Dr 3000

To Gain on Brand Name 3000

(Brand Name value increased in books on account of revaluation

of Brand Names)

Solution (d ii)

Earning Contingent Liability Dr 2000

To Gain on earnout 2000

(Earning contingent liability decreased due to

increase in earnout)

Notes:

1. All amount in Thousand USD ('000$)

2. All entries in books of Acquies as Asure Corporation


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