Good day. can you assist me in answering the following attached question. Thank
ID: 2579596 • Letter: G
Question
Good day. can you assist me in answering the following attached question. Thank you
Laser Vision Company On July 1, 2009 Sharp Image Corporation purchased Laser Vision by paying $500,000 cash and issuing a $300,000 note payable. At July 1, 2009, the balance sheet of Laser Vision Company was as follows Laser Vision Company Balance Sheet as at July 2009 Liabilities and Stockholders Equity Liabilities Assets Cash Account:s receivable Inventory Land Buildings (net) Equipment (net) Trademarks 100,000 Accounts payable 180,000 Long-term notes 100,000 300,000 200,000 80,000 150,000 140,000 20,000 payable Total Liabilities Shareholders' Equity Common stock $1 par Retained earnings Total shareholders' Equity Total liabilities and shareholder 's Equity 400,000 400,000 70,000 470,000 Total Assets 870,000 870,000 The recorded amounts all approximate current values except for land (fair value of $160,000), inventory (fair value of $125,000), and trademarks (fair value of $15,000) Required 1. Determine the value of goodwill on acquisition. Prepare the July 1, 2009 entry for Sharp Image Corporation to recor the purchase 2.Explanation / Answer
CALCULATION OF NET ASSETS ACQUIRED ON BUSINESS PURCHASE Particulars Amount Amount Assets Cash $ 1,00,000 Account Receivable $ 1,80,000 Inventory $ 1,25,000 Land $ 1,60,000 Building $ 1,50,000 Equipment $ 1,40,000 Trademarks $ 15,000 $ 8,70,000 Less: Liabilities Account Payable $ 1,00,000 Long Term Note Payable $ 3,00,000 $ 4,00,000 $ 4,70,000 CALCULATION OF THE GOODWILL ON BUSINESS PURCHASE Goodwill = Business Purchase - Net Assets Goodwill = $ 8,00,000 - $ 470,000 =$ 330,000 Journal Entries Sr. No. Date Account Title and explanation Debit Credit 1 July - 01, 2009 Business Purchase A/ C $ 8,00,000 To Liquidator of Laser Vision $ 8,00,000 (Amount payable against business purchase) 2 July - 01, 2009 Cash $ 1,00,000 Account Receivable $ 1,80,000 Inventory $ 1,25,000 Land $ 1,60,000 Building $ 1,50,000 Equipment $ 1,40,000 Trademarks $ 15,000 Goodwill $ 3,30,000 To Account Payable $ 1,00,000 To Long Term Note Payable $ 3,00,000 To Business Purchase $ 8,00,000 (Record the assets and liabilites) 3 July - 01, 2009 Liquidator of Laser Vision $ 8,00,000 To Cash Account $ 5,00,000 To Note Payable $ 3,00,000 (Record the payment of business purchase)
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