The Edge Mfg. Company decided to expand further by purchasing the Bell Company.
ID: 2369071 • Letter: T
Question
The Edge Mfg. Company decided to expand further by purchasing the Bell Company. The balance sheet of Bell Company as of December 31, 2012 was as follows:
Bell Company
Balance Sheet
December 31, 2012
AssetsEquities
Cash $112,000Accounts Payable $325,000
Receivables 460,000Common Stock 700,000
Inventory 275,000 Retained Earnings 837,000
Plant Assets (Net)1,025,000
Total Assets 1,862,500 Total Equities$1,962,500
An appraisal indicated thatthe fair market value of the inventory was $375,000 and that the fair market value of the plant assets was $1,225,000. The agreed purchase price was $2,350,000, and this amount was paid in cash kto the previous owners of the Bell Company.
prepare the entry for the Edge Company to record the purchase.
Explanation / Answer
Amount paid --- > 2,350,000
Actual worth --- > 1862500 + ( 375000 - 275000 ) + ( 1225000 - 1025000 ) = 2,162,500
Goodwill ---> 2,350,000 - 2,162,500 = 187,500
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