Assignment

Q.1. On December 31, 2002, paw Man Corporationacquired all the outstanding common
stock of SilbertCompanyfor $ 850,000 cash, including direct-out-of pocket cost of the

business combination. Stock holders’ equity of sibert totaled $ 800,000. Consisting of common
stock, $ 100,000, additional-paid-in-capital $ 300,000 and retained earnings $400,000. The
current fair value of Silbert’s identifiable net assets was the same as their carrying amounts
except for the following:

Current Carrying Fair Value amounts Differences

Inventories $ 339,000 $ 320,000 $ 19,000
Long-Term Inv’t in marketable
Debt security held to maturity 61,000 50,000 11,000
Plant assets (net) 1,026,000 984,000 42,000
Intangible assets (net) 54,000 36,000 18,000
Required
A. Determine the amount of goodwill
B. What is the consolidated balance of common stock, additional-paid-in-capital, retained
earnings, inventories, plant assets and intangible assets?
C. Record the journal entry

Q.2. On May 31, 2003ADDIS corporationacquired all 10,000 shares of THOMAS

company’s outstanding common stocks by paying birr 300,000 cash to THOMAS stockholders
and birr 50,000 cash for Finders and legal fees relating to business combination. There was no
contingent consideration and THOMAS becomes a subsidiary of ADDIS. The separate balance
sheet of ADDIS corporation and its subsidiary on May 31,2003, together with current fair
values of THOMASES identifiable net assets are as follows:
 ADDIS CORPORATION AND THOMAS COMPANY
Separate Balance sheets (Prior to business combination)

May 31, 2003

ADDIS THOMAS company
Corporation Carrying Current Amounts Fair value
Cash Birr 550,000 Birr 10,000 Birr 10,000
Trade account receivable 700,000 60,000 60,000
Inventories 1,400,000 120,000 140,000
Plant assets(net) 2,850,000 610,000 690,000
Total Assets Birr 5,500,000 Birr 800,000
Liabilities & SHE:
Current Liability Birr 500,000 Birr 80,000 Birr 80,000
Long term debt 1,000,000 400,000 440,000
Common stock birr 10 par 1,500,000 100,000
Additional-paid-in-capital 1,200,000 40,000
Retained earnings 1,300,000 180,000
Total liabilities & SHE Birr 5,500,000 Birr 800,000
Instruction
A. Prepare journal entries for ADDIS Corporation to record the business combination with
THOMAS Company on May 31, 2003.
B. Prepare a working paper for consolidated Balance sheet for ADDIS corporation and
subsidiary on May 31, 2003 and the related working paper elimination ( In journal
entryformat).

Q.3.On February 28, 2003, TanaCorporationacquired 88% of the outstanding common

stock of Awash Companyfor Birr 50,000 cash and 5,000 shares of Tana’s Birr 10 par
common stock with a current fair value of Birr 20 a share. Out-of-pocket costs of purchase type
business combination paid by Tana on February 28, 2003, were as follows:

Finder’s and Legal Fees ……………………………………. Birr 15,000

Costs associated with SEC registration ……………… 10,000
Total out-of-pocket costs of Business combination…. Birr 25,000
On February 28, 2003, Awashstockholders equity consisted of common stock, Birr 1 par Birr
10,000, Additional paid in capital, Birr 30,000, and Retained earnings, Birr 60,000. Carrying
amounts of the following three identifiable assets or liabilities of Awash were less than the
current fair values on February 28,2003 by the amounts indicated:

Inventories ……………………………………… Birr 20,000

Plant assets (net) ……………………………… 80,000
Bonds payable ………………………………….. 30,000
Required
a. Prepare journal entries for TANA Corporation on February 28, 2003 to record the
business combination with Awash Company.
b. Prepare working paper to complete the following amounts for the consolidated balance
sheet of TANACorporation and subsidiary on February 28, 2003.
1. Good will
2. Minority interest in net assets of subsidiary

Submission date;