Question

1. Parkland buys all of Sander Company’s assets and liabilities. Sander’ balance sheet at the date of acquisition, including fair value information on its reported assets and liabilities, is as follows:

	Book Value Dr (Cr)	Fair Value Dr (Cr)
Assets
Cash, receivables	$   1,000,000	$     950,000
Inventories	5,000,000	4,000,000
Property and equipment	60,000,000	45,000,000
Total assets	$ 66,000,000
Liabilities & Equity
Accounts and notes payable	$ 30,000,000	29,000,000
Common stock	500,000
Additional paid-in capital	15,000,000
Retained earnings	20,500,000
Total liabilities and equity	$ 66,000,000

Assets and liabilities attributed to Sander, not currently reported on its books are:

	Fair value
Favorable leaseholds	$ 3,000,000
Brand names	9,500,000
In-process R&D	1,000,000
Warranty liabilities	1,800,000

            In addition, a deferred tax liability of $2,000,000 is recognized as part of the acquisition.

The acquisition terms are as follows:

• Parkland paid Sander’ shareholders a total of $25,000,000 in cash.
• Parkland issued a total of 2,000,000 new shares of its common stock to Sander’ shareholders.   Parkland’s shares have a par value of $1/share and a total fair value of $92,000,000.
• Parkland paid $900,000 in cash for registration fees to issue the shares.
• Parkland paid $1,000,000 to a brokerage company for merger advisement, all paid in cash.

prepare the journal entry to record this acquisition on Parkland’s books.

Answer 1

Answer:

As per the given data about Parkland buys all of Sander Company's Assets & Laiabilities.

Parkland's Books:

Journal Entry for Acquisition:

Date	Particulars	Debit	Credit
XXXX	Cash & Receivables A/c	$       9,50,000
	Inventories A/c	$    40,00,000
	Property and Equipment A/c	$ 4,50,00,000
	Favourable Leaseholds A/c	$    30,00,000
	Brand Names A/c	$    95,00,000
	IN-Process R & D A/c	$    10,00,000
	Registration Fee Expenses A/c	$       9,00,000
	Good Will A/c	$ 5,83,50,000
	To Accounts & Notes Payable A/c		$    29,00,000
	Warranty Liabilities A/c		$    18,00,000
	Deferred Tax Liabilities A/c		$    20,00,000
	Cash A/c		$ 2,50,00,000
	Common Stock A/c		$    20,00,000
	Additional Paid in Capital A/c		$    90,00,000
	( Benig Assets and Liabiliteis Acquired and Acquisition amount paid in Cash and Stock, Goodwill Created)

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