Question

Parkland buys all of Sander Company’s assets and liabilities. Sander’ balance sheet at the date of...

  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.

Homework Answers

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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