On June 1, 2011, Gamma Company acquired all of the net assets of Pi Company for $140,000
Question:
On June 1, 2011, Gamma Company acquired all of the net assets of Pi Company for $140,000 cash. The two companies merged, with Gamma Company surviving. On the date of acquisition, Pi Company’s balance sheet included the following:
Balance Sheet at June 1, 2011 Pi Company
Inventory ................ $ 13,000
Property and equipment (net) ....... 165,000
Total assets ............. $178,000
Liabilities ................ $ 82,000
Common stock (par $1) ......... 65,000
Retained earnings ............. 31,000
Total liabilities and stockholders’ equity . $178,000
On the date of acquisition, the inventory had a fair value of $12,000 and the property and equipment had a fair value of $180,000. The fair value of the liabilities equaled their book value.
Required:
1. How much goodwill was involved in this merger? Show computations.
2. Give the journal entry that Gamma Company would make to record the merger on June 1, 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 140000 Fair value of net ...View the full answer
