Revaluation of assets, Accounting Problems help

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Problem 1-5(LO 3, 4)Revaluation of assets.

Jack Company is a corporation that was organized on July 1, 2015. The June 30, 2020, balance sheet for Jack is as follows:

Assets

Investments

$ 400,500

Accounts receivable

$1,250,000

Allowance for doubtful accounts

 (300,000)

950,000

Inventory

1,500,000

Prepaid insurance

18,000

Land

58,000

Machinery and equipment (net)

1,473,500

Goodwill

 100,000

Total assets

$4,500,000

Liabilities and Equity

Current liabilities

$1,475,000

Common stock ($10 par)

1,200,000

Retained earnings

 1,825,000

 Total liabilities and equity

$4,500,000

The experience of other companies over the last several years indicates that the machinery and equipment can be sold at 130% of its book value.

An analysis of the accounts receivable indicates that the realizable value is $925,000. An independent appraisal made in June 2020 values the land at $70,000. Using the lower-of-cost-or-market rule, inventory is to be restated at $1,200,000.

Calway Corporation plans to exchange 18,000 of its shares for the 120,000 Jack shares. During June 2020, the fair value of a share of Calway Corporation is $270. Acquisition costs are $12,000.

The stockholders’ equity account balances of Calway Corporation as of June 30, 2015, are as follows:

Common stock ($10 par)

$2,000,000

Paid-in capital in excess of par

580,000

Retained earnings

 2,496,400

Total stockholders’ equity

$5,076,400

Required

Record the acquisition of Jack Company by Calway on July 1, 2020. Use value analysis to support the acquisition entries.

Problem 1-6 (LO 3, 4) Cash purchase with goodwill.

Tweeden Corporation is contemplating the acquisition of the net assets of Sylvester Corporation in anticipation of expanding its operations. The balance sheet of Sylvester Corporation on December 31, 2015, is as follows:

Sylvester Corporation

Balance Sheet

December 31, 2015

Current assets:

Current liabilities:

Notes receivable

$ 24,000

Accounts payable

$ 45,000

Accounts receivable

56,000

Payroll and benefit-related liabilities

12,500

Inventory

31,000

Other current assets

 18,000

Debt maturing in one year

 10,000

 Total current assets

$129,000

 Total current liabilities

$ 67,500

Investments

65,000

Fixed assets:

Other liabilities:

Land

$ 32,000

Long-term debt

$248,000

Building

245,000

Payroll and benefit-related liabilities

 156,000

Equipment

 387,000

 Total fixed assets

664,000

 Total other liabilities

404,000

Intangibles:

Stockholders’ equity:

Goodwill

$ 45,000

Common stock

$100,000

Patents

23,000

Paid-in capital in excess of par

250,000

Trade names

 10,000

Retained earnings

 114,500

 Total intangibles

 78,000

 Total equity

 464,500

Total assets

$936,000

Total liabilities and equity

$936,000

An appraiser for Tweeden determined the fair values of Sylvester’s assets and liabilities to be as shown on next page.

Assets

Liabilities

Notes receivable

$ 24,000

Accounts payable

$ 45,000

Accounts receivable

56,000

Payroll and benefit-related liabilities—current

12,500

Inventory

30,000

Other current assets

15,000

Debt maturing in one year

10,000

Investments

63,000

Land

55,000

Long-term debt

248,000

Building

275,000

Payroll and benefit-related liabilities—long-term

156,000

Equipment

426,000

Goodwill

Patents

20,000

Trade names

15,000

The agreed-upon purchase price is $580,000 in cash. Acquisition costs paid in cash total $20,000.

Required

Using the above information, do value analysis and prepare the entry on the books of Tweeden Corporation to acquire the net assets of Sylvester Corporation on December 31, 2015.

Solution:

Please use attached Excel file to put the answers on.

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