Question

In a pre-2009 business combination, Acme Company acquired all of Brem Company’s assets and liabilities for cash. After the combination Acme formally dissolved Brem. At the acquisition date, the following book and fair values were available for the Brem Company accounts:

	Book Values			Fair Values
Current assets	$	81,800		$	81,800
Equipment		131,000			198,000
Trademark		0			352,000
Liabilities		(67,800	)		(67,800	)
Common stock		(100,000	)
Retained earnings		(45,000	)

In addition, Acme paid an investment bank $31,200 cash for assistance in arranging the combination.

Using the legacy purchase method for pre-2009 business combinations, prepare Acme’s entry to record its acquisition of Brem in its accounting records assuming the following cash amounts of $690,400 and $439,400 were paid to the former owners of Brem.

How would these journal entries change if the acquisition occurred post-2009 and therefore Acme applied the acquisition method?

(If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round your intermediate calculations.)

1. Record the acquisition of Brem using the purchase method assuming $690,400 was paid to the former owners of Brem

2. Record the acquisition of Brem using the purchase method assuming $439,400 was paid to the former owners of Brem

3. Record the acquisition of Brem using the acquisition method assuming $690,400 was paid to the former owners of Brem

4. Record the expenses related to the combination using the acquisition method assuming $690,400 was paid to the former owners of Brem

5. Record the acquisition of Brem using the acquisition method assuming $439,400 was paid to the former owners of Brem

6. Record the expenses related to the combination using the acquisition method assuming $439,400 was paid to the former owners of Brem

Answer 1

ans 1

current assets a/c Dr. $81800

equipment a/c Dr. $198000

trademark a/c Dr. $352000

goodwill a/c Dr. $126400(bal fig)

to liabilities a/c $67800

to cash $690400

(being assets and liabilities taken over)

ans 2

current assets a/c Dr. $81800

equipment a/c Dr. $198000

trademark a/c Dr. $352000

to liabilities $67800

to cash a/c $439400

to capital reserve $124600

(being assets and liabilities taken over)

ans 3

current assets a/c Dr. $81800

equipment a/c Dr. $131000

general reserve a/c Dr. $590400 (bal fig)

to liabilities a/c $67800

to retained earnings a/c $45000

to cash a/c $690400

(being assets and liabilities taken over)

ans 4

goodwill a/c Dr.$690400

to cash $690400

(being amount paid for expenses)

ans 5

general reserve a/c Dr $439400

to cash a/c $439400

(being expenses paid )