Parchesi, Inc. will acquire the net assets of Scrabble, Inc. for cash.  Parchesi, which has a 30% marginal tax rate, will incur $25,000 of direct acquisition costs.  Scrabble’s balance sheet follows:

                                                                               

Parchesi has secured appraisals indicating the following market values of Scrabble’s accounts and embeds this evidence into its decision to pay the indicated purchase price below:

Accounts Receivable............................$ 30,000

Inventory..................................................95,000

Equipment...............................................40,000

Land.........................................................50,000

Buildings.................................................250,000

Bonds Payable.......................................75,000

Parchesi reports financial results on a calendar year basis.  Ignore any tax effects.

REQUIRED:

In a WORD PROCESED document, make the entries to record this purchase, showing your work to support your entries, using the following two independent assumptions:

Purchase Method effective through 12/15/2008, after 12/15/2008 Acquisition method used

1. Assume Parchesi paid $400,000 on 1/2/20 for Scrabble’s net assets. What if the purchase date was 1/2/08 – how does your answer change?
2. Assume Parchesi paid $300,000 on 1/2/20 for Scrabble’s net assets. What if the purchase date was 1/2/08 – how does your answer change?

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Accounts Receivable Inventory Equipment Accumulated Depreciation Land Buildings Accumulated Depreciation Total Assets Assets Bonds Payable Common Stock, $1 Par Paid-in-capital in excess of par $ 80,000 (50,000) $ 300,000 (100,000) Liabilities and Stockholders' Equity Retained Earnings Total Liabilities and Stockholders' Equity $ 30,000 90,000 30,000 50,000 200,000 $ 400,000 $ 80,000 160,000 80,000 80,000 $ 400,000 Accounts Receivable Inventory Equipment Accumulated Depreciation Land Buildings Accumulated Depreciation Total Assets Assets Bonds Payable Common Stock, $1 Par Paid-in-capital in excess of par $ 80,000 (50,000) $ 300,000 (100,000) Liabilities and Stockholders' Equity Retained Earnings Total Liabilities and Stockholders' Equity $ 30,000 90,000 30,000 50,000 200,000 $ 400,000 $ 80,000 160,000 80,000 80,000 $ 400,000

Answer rating: 100% (QA)

ANSWER On 1220 Parchesi paid 400000 for Scrabbles net assets The following journal entries would be made to record this purchase Dr Accounts Receivabl... View the full answer