Question

On February 1, 2X09, Bodner, Inc. acquired a 100% interest in Bolenski Company by paying $34 million for 100% of the outstanding stock of Bolenski Company. The book value of the net assets amounted to $25 million, but an independent appraiser valued the printing press at $1.5 million over its book value. The book value and fair value of the remaining assets and liabilities were equal. Required:

1. On February 1, 2X09, prepare the eliminating entry by Bodner, Inc. after the acquisition.

2. What will occur if the goodwill decreases in value after the acquisition?

Answer 1

(1). Entries on february 1, 2x09 ( In $ million)

(1). Bolenski company A/C debit $34

To Bolenski liquidator A/C $34

( Being Business purchase)

(2). Assets Account Debit $26.5

Goodwill Account Debit $7.5

To Bolenski company A/C $34

(Being assets record )

(3). Bolenski liquidator A/C Debit $34

To Bank Account A/C $34

(Being Payment made)

(2). If Goodwill decrease in value after the acquisition then it will be write off over a period of time but at the time of purchase it will be recorded.