Exercise 12-12 (Part Level Submission) On July 1, 2017, Ayayai Corporation purch

Question

Exercise 12-12 (Part Level Submission)

On July 1, 2017, Ayayai Corporation purchased Young Company by paying $251,000 cash and issuing a $100,000 note payable to Steve Young. At July 1, 2017, the balance sheet of Young Company was as follows.

$50,000

$202,000

89,500

232,500

100,000

$434,500

40,000

74,500

69,500

11,000

$434,500

The recorded amounts all approximate current values except for land (fair value of $60,000), inventory (fair value of $124,000), and trademarks (fair value of $14,960).

Prepare the July 1 entry for Ayayai Corporation to record the purchase. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Account Titles and Explanation

Debit

Credit

Cash

$50,000

Accounts payable

$202,000

Accounts receivable

89,500

Stockholders’ equity

232,500

Inventory

100,000

$434,500

Land

40,000

Buildings (net)

74,500

Equipment (net)

69,500

Trademarks

11,000

$434,500

Exercise 12-12 (Part Level Submission) On July 1, 2017, Ayayai Corporation purchased Young Company by paying $251,000 cash and issuing a $100,000 note payable to Steve Young. At July 1, 2017, the balance sheet of Young Company was as follows $50,000 89,500 100,000 40,000 74,500 69,500 11,000 $434,500 Cash $202,000 232,500 $434,500 Accounts payable Accounts receivable Stockholders' equity Inventory Land Buildings (net) Equipment (net) Trademarks The recorded amounts all approximate current values except for land (fair value of $60,000), inventory (fair value of $124,000), and trademarks (fair value of $14,960)

Explanation / Answer

SOLUTION

Journal Entry to record the purchase-

Date Account titles and Explanation Debit ($) Credit ($) July 1 Cash 50,000 Receivables 89,500 Inventory 124,000 Land 60,000 Buildings 74,500 Equipment 69,500 Trademarks 14,960 Goodwill 70,540 Cash 251,000 Accounts payable 202,000 Notes payable 100,000 (To record the purchase of Young Company )

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