Soal  

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Jawablah soal  chapter 1 hal. 46  P1 – 1 Acquisition journal entries  (Ebook Beam)

P1-1

Acquisition journal entries

Phen Ltd. issued 500,000 common shares of $10 at par and paid $1,000,000 for the net assets of
Sung Ltd. on August 17, 2014. The market value of Phen Ltd.’s stocks was $20 per share at the time.
Sung Ltd. was dissolved immediately after the acquisition. The information related to Sung Ltd.’s net
assets is as follows (in thousands) :

Book Value Fair Value

Cash $ 2,000 $ 2,000
Trade receivables 800 600
Inventories 3,200 3,000
Prepaid expenses 1,000 1,000
Land 6,000 6,800
Building-net 10,000 10,100
Equipment-net 3,500 3,000
Trade payable 1,300 1,500
Notes payable 4,300 4,600
Bonds payable 6,600 7,100
Common stock, $5 par 5,300
Retained Earnings 9,000

REQUIRED : Prepare the necessary journal entries for the acquisition.

Jawaban :

The entry to record the acquisition of the assets :

Investment in Sung Ltd. (+A) $11.000.000*

Common stock, $10 par (+SE) $5.000.000**

Additional paid-in-capital (+SE) $5.000.000***

Cash (-A) $1.000.000

*(500.000 shares x $20) + $1.000.000

** 500.000 shares x $10

***500.000 shares x ($20 - $10)

The entry to record Sung Ltd.’s assets directly on Phen Ltd.’s books :

Cash (+A) $2.000.000

Trade receivables (+A) $600.000

Inventories (+A) $3.000.000

Prepaid expenses (+A) $1.000.000

Land (+A) $6.800.000

Building-net (+A) $10.100.000

Equipment-net (+A) $3.000.000

Trade payable (+L) $1.500.000

Notes payable (+L) $4.600.000

Bonds payable (+L) $7.100.000

Investment in Sung Ltd.(+A) $11.000.000

Gain from bargain purchase (Ga, +SE) $2.300.000*

*Fair value net assets acquired

= $2.000.000 + $600.000 + $3.000.000 + $1.000.000 + $6.800.000 + $10.100.000 +

$3.000.000 - $1.500.000 - $4.600.000 - $7.100.000

= $13.300.000

Acquisition cost = $11.000.000

Gain from bargain purchase = $13.300.000 - $11.000.000 = $2.300.000