Kieso, Intermediate Accounting, 16e Intermediate Accounting (ACCT 3103 and 31 .B
ID: 2573261 • Letter: K
Question
Kieso, Intermediate Accounting, 16e Intermediate Accounting (ACCT 3103 and 31 .BACKIE STANDARD VIEW PRINIER VERSION NEX Exercise 12-11 Fred Moss, owner of Moss Interiors, is negotiating for the purchase of Zweifel Galleries. The balance sheet of Zweifel is given in an abbreviated form below. ZWEIFEL GALLERIES BALANCE SHEET AS OF DECEMBER 31, 2017 Assets Liabilities and Stockholders' Equity Accounts payable $100,000 $50,000 300,000 350,000 Cash Land Buildings (net) Equipment (net) 175,000 Common stock Copyrights (net) Total assets $575.000 Total liabilities and stockholders' equity 0,000 Notes payable (long-term) 200,000 Total liabilities $200,000 30,000 Retained earnings 25,000 225,000 $575,000 Moss and Zwelfel agree that: 1. Land is undervalued by $30,000. 2. Equipment is overvalued by $5,000 Zweifel agrees to sell the gallery to Moss for $350,000 Prepare the entry to record the purchase of Zweifel Galleries on Moss's books. (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 O for the amounts.) Account Titles and Explanation Debit CreditExplanation / Answer
Solution:
Net assets of Zweifel as reported $225,000
Adjustments to fair value Increase in land value 30,000
Decrease in equipment value (5,000) 25,000
Net assets of Zweifel at fair value 250,000
Selling price 350,000
Amount of goodwill to be recorded $100,000
The journal entry to record this transaction is as follows: Cash............................................................................................. 100,000
Land ............................................................................................. 100,000 Building....................................................................................... 200,000 Equipment.................................................................................. 170,000 Copyright.................................................................................... 30,000 Goodwill...................................................................................... 100,000
Accounts Payable............................................................. 50,000
Long-term Notes Payable ............................................... 300,000
Cash .................................................................................. 350,000
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.