PattonPatton has acquired several other companies. Assume that PattonPatton purc
ID: 2341071 • Letter: P
Question
PattonPatton has acquired several other companies. Assume that PattonPatton purchased KelleherKelleher for $ 7 comma 000 comma 000$7,000,000 cash. The book value of Kelleher'sKelleher's assets is $ 17 comma 000 comma 000$17,000,000 (market value, $ 19 comma 000 comma 000$19,000,000), and it has liabilities of $ 15 comma 000 comma 000$15,000,000 (market value, $ 15 comma 000 comma 000$15,000,000). Requirements 1. Compute the cost of goodwill purchased by PattonPatton. 2. Record the purchase of KelleherKelleher by PattonPatton. Requirement 1. Compute the cost of goodwill purchased by PattonPatton. Purchase price to acquire Kelleher Market value of Kelleher's assets Less: Market value of Kelleher's liabilities Less: Market value of Kelleher's net assets Goodwill Requirement 2. Record the purchase of KelleherKelleher by PattonPatton, Inc. (Record debits first, then credits. Select the explanation on the last line of the journal entry table.)
Explanation / Answer
Market value of net Assets
Market value of Assets
19000000
Less: market value of liabilities
-15000000
Market value of net Assets
4000000
Cost of goodwill purchased by Patton
Cash paid for acquisition of Kelleher
7000000
Less: market value of net Assets
-4000000
Cost of goodwill
3000000
Patton
Journal entries
Date
Account title & explanation
Debit
Credit
1
Assets
19000000
Goodwill
3000000
Liabilities
15000000
Cash
7000000
(To record acquisition of Kelleher.)
Market value of net Assets
Market value of Assets
19000000
Less: market value of liabilities
-15000000
Market value of net Assets
4000000
Cost of goodwill purchased by Patton
Cash paid for acquisition of Kelleher
7000000
Less: market value of net Assets
-4000000
Cost of goodwill
3000000