purt II. (30 Points -3 points each, except goodwill is worth 6 points). Denver C

Question

purt II. (30 Points -3 points each, except goodwill is worth 6 points). Denver Corp. acquired all assets and liabilities of Michigan Co. on Jan. 1, 2018, by issuing 40,000 shares of its voting common stock. When exchanged, Denver's stock was trading for $20 per share. Balance sheet information: Denver Michigan Book Value Fair Value Book Value Fair Value Cash Inventory Non-Current Assets Total Assets s 100,000 100,000 $100,000 $100,000 400, 000 1,300,000 200,000 400,000 300,000 200,000 1, 000, 000 $2, 000,000 $600,000 $700,000 s 300,000 290,000 $100,000 $ 95,000 500,000 600,000 Accounts Payable Bonds Payable Common Stock 200,000 205, 000 50,000 40,000 $10 Par 300,000 250,000 100,000 $5 Par Additional Paid-In Capital 50,000 150,000 Retained Earnings Total Liabilities and Equity $1,000, 000 $600,000 Required: What amount should be reported on the combined financial statements immediately following the business combination in the following accounts: 1. Cash 2. Inventory 3. Noncurrent Assets 4. Goodwill 5. Accounts Payable 6. Bonds Payable 7. Common Stock 8. Additional Paid-In Capital 9. Retained Earnings

Explanation / Answer

Answer = 1) Denver Michigan Total Book Value Fair Value Cash $                     1,00,000 $              1,00,000 $        2,00,000 Inventory $                     4,00,000 $              4,00,000 $        8,00,000 Non Current Assets $                     5,00,000 $              2,00,000 $        7,00,000 Account Payable $                     3,00,000 $                 95,000 $        3,95,000 Bonds Payable $                     2,00,000 $                 40,000 $        2,40,000 CACULATION OF TOTAL OF GOODWILL Fair Value of the total Assets aquired $                     7,00,000 Less: Account Payable $                        95,000 Less: Bonds Payable $                        40,000 Net assets Aquired (B) $                     5,65,000 Shares Paid 40,000 Shares @ $ 20 (A) $                     8,00,000 Goodwill = Difference of (A-B) $                     2,35,000 Gooodwill = $                     2,35,000 CACULATION OF TOTAL OF COMMON STOCK Common Stock $ 10 Par $                     3,00,000 Add: Issued 40,000 for acquire Michigan @ $ 10 Par = $                     4,00,000 Total $                     7,00,000 CACULATION OF TOTAL OF ADDITTIONAL PAID IN CAPITAL Opening Balance = $                        50,000 Add: taken from issue ti Michigan (40,000 X $ 10) $                     4,00,000 Total $                     4,50,000 CACULATION OF RETAINED EARNING Opening Retained Earning = $                     1,50,000 Add: From Aquiring Company will take Zero $                                  -   Total $                     1,50,000

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