Maurice Tutor
$15/per page/Negotiable
Problem 1-6 (LO 3, 4) Cash purchase with goodwill. Tweeden Corporation is contem- plating the acquisition of the net assets of Sylvester Corporation in anticipation of expanding its operations. The balance sheet of Sylvester Corporation on December 31, 20X1, is as follows:
Required
Sylvester Corporation Balance Sheet December 31, 20X1
|
Current assets: Notes receivable . . . . . . . . . . . . . . . |
$ 24,000 |
|
|
Current liabilities: Accounts payable . . . . . . . . . . . . . . |
$ 45,000 |
|
|
|
Accounts receivable . . . . . . . . . . . . |
56,000 |
|
|
Payroll and benefit-related liabilities |
12,500 |
||
|
Inventory . . . . . . . . . . . . . . . . . . . . . |
31,000 |
|
|
|
|
||
|
Other current assets . . . . . . . . . . . . . |
18,000 |
|
|
Debt maturing in one year . . . . . . . . |
10,000 |
||
|
Total current assets. . . . . . . . . . . . |
|
|
$129,000 |
Total current liabilities . . . . . . . . . |
|
|
$ 67,500 |
|
Investments . . . . . . . . . . . . . . . . . . . Fixed assets: |
|
|
65,000 |
Other liabilities: |
|
|
|
|
Land. . . . . . . . . . . . . . . . . . . . . . . . . |
$ 32,000 |
|
|
Long-term debt . . . . . . . . . . . . . . . . . |
$248,000 |
|
|
|
Building . . . . . . . . . . . . . . . . . . . . . . |
245,000 |
|
|
Payroll and benefit-related liabilities |
156,000 |
|
|
|
Equipment . . . . . . . . . . . . . . . . . . . . |
387,000 |
|
|
|
|
|
|
|
Total fixed assets . . . . . . . . . . . . . Intangibles: Goodwill . . . . . . . . . . . . . . . . . . . . . |
$ 45,000 |
|
664,000 |
Total other liabilities. . . . . . . . . . . Stockholders’ equity: Common stock. . . . . . . . . . . . . . . . . |
$100,000 |
|
404,000 |
|
Patents . . . . . . . . . . . . . . . . . . . . . . . |
23,000 |
|
|
Paid-in capital in excess of par . . . . |
250,000 |
|
|
|
Trade names . . . . . . . . . . . . . . . . . . |
10,000 |
|
|
Retained earnings . . . . . . . . . . . . . . |
114,500 |
|
|
|
Total intangibles . . . . . . . . . . . . . |
|
|
78,000 |
Total equity . . . . . . . . . . . . . . . . . |
|
|
464,500 |
|
Total assets . . . . . . . . . . . . . . . . . . . |
|
|
$936,000 |
Total liabilities and equity . . . . . . . . |
|
|
$936,000 |
An appraiser for Tweeden determined the fair values of Sylvester’s assets and liabilities to be as follows:
Assets Liabilities
|
Notes receivable . . . . . . . . . . . . . . . . . . . . . . . . . . |
$ 24,000 |
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . |
$ 45,000 |
|
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . |
56,000 |
Payroll and benefit-related liabilities—current. . . . . |
12,500 |
|
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
30,000 |
|
|
|
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . |
15,000 |
Debt maturing in one year . . . . . . . . . . . . . . . . . . . . |
10,000 |
|
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
63,000 |
|
|
|
Land. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
55,000 |
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
248,000 |
|
Building . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
275,000 |
Payroll and benefit-related liabilities—long-term. . . |
156,000 |
|
Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
426,000 — |
|
|
|
Patents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
20,000 |
|
|
|
Trade names . . . . . . . . . . . . . . . . . . . . . . . . . . . . . |
15,000 |
|
|
Required
The agreed-upon purchase price is $580,000 in cash. Acquisition costs paid in cash total
$20,000.
Using the above information, do value analysis and prepare the entry on the books of Twee- den Corporation to acquire the net assets of Sylvester Corporation on December 31, 20X1.