Question

llerton 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	$	46,750			$	46,750
Building		100,750				57,850
Land		15,750				35,350
Trademark		0				38,000
Goodwill		23,000				?
Liabilities		(51,250	)			(51,250	)
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: $165,500 and $102,500. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

1

Record the acquisition of Delex assuming the cash exchange of $165,500

2

Record the acquisition of Delex assuming the cash exchange of $102,500

Transaction	General Journal	Debit	Credit
1

Answer 1

1. Cash Exchange is $165,500

Accounts title and Explanation	Debit ($)	Credit ($)
Current Assets	46,750
Building	57,850
Land	35,350
Trademark	38,000
Goodwill	38,800
Liabilities		51,250
Cash		165,500

2. Cash Exchange is $102,500

Accounts title and Explanation	Debit ($)	Credit ($)
Current Assets	46,750
Building	57,850
Land	35,350
Trademark	38,000
Gain on Bargain Purchase		24,200
Liabilities		51,250
Cash		102,500

Explanation -

1. Goodwill under acquisition method-

	Amount ($)
Fair value of consideration transferred	165,500
Fair value of net identifiable asset	126,700
Excess to goodwill	38,800

2. Bargain purchase under acquisition method-

	Amount ($)
Fair value of consideration transferred	102,500
Fair value of net identifiable asset	126,700
Gain on bargian purchase	24,200