On September 1, 2014, Sunshine Ltd. acquired all the assets (with the exception

Question

On September 1, 2014, Sunshine Ltd. acquired all the assets (with the exception of cash) and liabilities of Moonbeam Ltd. Under the terms of acquisition, Moonbeam shareholders received 3 Class A Sunshine Ltd. shares plus $2.00 cash for every four shares of Moonbeam. At the acquisition date, Sunshine’s Class A shares were valued at $2.50 per share. Sunshine had agreed to cover Moonbeam’s estimated liquidation costs of $10,000. The $1,500 of cash in Moonbeam’s bank at the acquisition date will go towards paying these costs. The statements of financial position at the acquisition date are as follows: Sunshine Moonbeam Ltd. Ltd. Cost FMV Cash $ 30,000 $ 1,500 $ 1,500 Accounts receivable 52,500 28,500 26,250 Inventory 78,000 39,750 48,000 Property and equipment (net) 449,250 224,250 248,250 Kucey Ltd. bonds (investment) _67,500 _27,000 28,500 677,250 321,000 Accounts payable 117,000 114,000 114,000 Loan payable ___-___ _60,000 60,000 117,000 174,000 Share capital issued at $1 450,000 120,000 Retained earnings 110,250 _27,000 560,250 147,000 $ 677,250 $ 321,000 Items not reflected in Moonbeam’s statement of financial position: • Contingent liability related to a loan guarantee was reported in the notes to the financial statements and has a fair value of $2,000. • Moonbeam had expensed $15,000 in research and development costs in the past year. At the acquisition date, Sunshine has determined that the value of the research in progress is $3,000. Sunshine’s statement of financial position does not include $5,000 in fees for valuation and accounting advice related to the acquisition of Moonbeam. Sunshine expects to pay these fees shortly. Required: a) Prepare the acquisition analysis and calculate the goodwill. b) Prepare all the journal entries in Sunshine’s books to record the acquisition of Moonbeam. c) Prepare Sunshine’s statement of financial position immediately following the acquisition.

Explanation / Answer

Part A)

The acquisition analysis and calculation of goodwill has been shown in the following table:

______________

Part B)

The journal entries are given below:

______________

Part C)

The statement of financial position after acquisition is given below:

Kucey Ltd. bonds (investment) 2,8500 Property & Equipment 248,250 Inventory 48,000 Accounts Receivable 26,250 Research and Development 3,000 Less Accounts Payable -114,000 Loans Payable -60,000 Net Identifiable Assets 180,000 Common Stock received by Moonbeam (120,000*3/4*2.50) 225,000 Cash Paid (120,000*3/4*2) 180,000 Tota Purchase Price 405,000 Goodwill (405,000 – 180,000) 225,000 Add Liquidation Expenses incurred by Sunshine Limited 10,000 Total Value of Goodwill $235,000

Related Questions

Navigate

• Browse (All)
• Browse O
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.