1 2 4 5 6 7 8 Case 4.1 Business Combinations (200 points) XYZ Corporation expanded its operations by purchasing ABC Corporation on December 31, 2018. The exchange was structured so that it was nontaxable. XYZ issued 14,000 shares of its $2 par stock having a $30 market value for the net assets of ABC and paid cash for the following costs related to the acquisition. The following balance sheet was prepared for ABC Corporation on the date of purchase. ABC Corporation Balance Sheet December 31, 2018 9 10 11 12 Current assets 13 Inventory 47 48 49 50 51 52 53 54 Building Accum depreciation Equipment Accum depreciation 14 Property, plant & Equipment: 15 Land 16 17 18 19 20 $368,000 Total liabilities and Equity 21 22 The companies agreed that the following market values should replace the above book values for the purpose of the purchase 23 24 Building Equipment 25 26 27 28 Total assets Assets Total consideration Market value of securities issued Direct acquisition costs 37 38 Cureent assets 39 Inventory 40 Accounts payable 41 Bonds payable 42 Land 43 Building DTL 44 45 Equipment 46 DTL 150,000 Less assignment to indentifable assets and liabilities 35,000 28,000 165.000 (80,000) (25,000) Available for goodwill not lof DTL Goodwill DTL 95,000 $200,000 78,000 29 30 31 32 A. Computation of assigned Values for Long-Lived Assets 33 34 35 36 Total price Liabilities and Equity Accounts payable Bonds Payable Stockholder's equity Common stock: ($10 par) Retained earnings 153,000, Instructions Assume that the price is high enough for goodwill. Prepare the journal entries on the books of the XYZ Corporation. Assume a tax rate of 30%. Use the supporting schedule that follows to orgaanize your calculations 40,000 90,000 85,000 193,000 $368,000 B. Record the journal entries for the purchase of ABC Corporation in an Excel Spreadsheet