On January 4, 2011, DAngelo Company acquired all of the net assets (assets and liabilities) of Barato
Question:
On January 4, 2011, D’Angelo Company acquired all of the net assets (assets and liabilities) of Barato Company for $124,000 cash. The two companies merged, with D’Angelo Company surviving. On the date of acquisition, Barato’s balance sheet included the following.
Barato
Balance Sheet at January 4, 2011 Company
Cash ................ $23,000
Property and equipment (net) ...... 65,000
Total assets ............. $88,000
Liabilities ............... $12,000
Common stock (par $5) ......... 40,000
Retained earnings ........... 36,000
Total liabilities and stockholders’ equity .. $88,000
The property and equipment had a fair value of $72,000. Barato also owned an internally developed patent with a fair value of $4,000. The book values of the cash and liabilities were equal to their fair values.
Required:
1. How much goodwill was involved in this merger? Show computations.
2. Give the journal entry that D’Angelo would make to record the merger on January 4, 2011.
Goodwill is an important concept and terminology in accounting which means good reputation. The word goodwill is used at various places in accounting but it is recognized only at the time of a business combination. There are generally two types of... Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...
Step by Step Answer:
Req 1 Purchase price for the net assets 124000 Fair value of net assets acqui...View the full answer
