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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