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Beams10e Ch01 Business Combinations Finance
Beams10e Ch01 Business Combinations Finance
1 11-Sep-11
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Cash 50
Net receivables 140
Entries with Goodwill Inventories 250
The entry to record the acquisition of the net Land 100
assets: Buildings 500
Investment in Seed Co. 1,400 Equipment 350
Cash 400 Patents 50
Common stock, $10 par 500 Goodwill 200
Additional paid-in-capital 500 Accounts payable 60
The entry to record Seed’s assets directly on Pitt’s Notes payable 135
books: Other liabilities 45
Investment in Seed Co. 1,400
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Cash 50
Net receivables 140
Goodwill Controversies
Inventories 250
Land 100 • Capitalized goodwill is the purchase price not
Buildings 500 assigned to identifiable assets and liabilities.
Equipment 350 – Errors in valuing assets and liabilities affect
the amount of goodwill recorded.
Patents 50
• Historically goodwill in most industrialized
Accounts payable 60 countries was capitalized and amortized.
Notes payable 135 • Current IASB standards, like U.S. GAAP
Other liabilities 45 – Capitalize goodwill,
Investment in Seed Co. 1,000 – Do not amortize it, and
Gain from bargain purchase 200 – Test it for impairment.
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