Question

Flint Industries purchased all the following assets and liabilities of Protector Goods for $963,000 cash: Book...

Flint Industries purchased all the following assets and liabilities of Protector Goods for $963,000 cash:

Book Value Fair Value
Accounts Receivable $117,000 $117,000
Inventory 101,000 110,000
Property, Plant & Equipment (net) 512,000 638,000
Land 154,000 175,000
Accounts Payable 77,000 77,000
Notes Payable 113,000 113,000


Prepare the appropriate journal entries for Flint Industries on acquisition. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Account Titles and Explanation

Debit

Credit

                                                          Accounts PayableAccounts ReceivableCashGoodwillInventoryLandNo EntryNotes PayableProperty, Plant and Equipment

                                                          Accounts PayableAccounts ReceivableCashGoodwillInventoryLandNo EntryNotes PayableProperty, Plant and Equipment

                                                          Accounts PayableAccounts ReceivableCashGoodwillInventoryLandNo EntryNotes PayableProperty, Plant and Equipment

                                                          Accounts PayableAccounts ReceivableCashGoodwillInventoryLandNo EntryNotes PayableProperty, Plant and Equipment

                                                          Accounts PayableAccounts ReceivableCashGoodwillInventoryLandNo EntryNotes PayableProperty, Plant and Equipment

                                                          Accounts PayableAccounts ReceivableCashGoodwillInventoryLandNo EntryNotes PayableProperty, Plant and Equipment

                                                          Accounts PayableAccounts ReceivableCashGoodwillInventoryLandNo EntryNotes PayableProperty, Plant and Equipment

                                                          Accounts PayableAccounts ReceivableCashGoodwillInventoryLandNo EntryNotes PayableProperty, Plant and Equipment

Homework Answers

Answer #1

Goodwill = (fair value of liabilities acquired + Purchases consideration) - Fair value of assets acquired

= (Accounts payable + Note payable + Cash paid) - (Accounts receivable + Inventory + Property, Plant & Equipment + Land)

= (77,000 + 113,000 + 963,000) - (117,000 + 110,000 + 638,000 + 175,000) -

= - 190,000 - 963,000 - 1,040,000

= $113,000

Journal

Account Title and Explanation

Debit

Credit

Accounts receivable 117,000
Inventory 110,000
Property, Plant & Equipment 638,000
land 175,000
Goodwill 113,000
Accounts payable 77,000
Note payable 113,000
Cash 963,000
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