Prepare the necessary journal entry in the books of XYZ to record the acquisitio

Question

Prepare the necessary journal entry in the books of XYZ to record the acquisition of ABC.

On June 30, 2018 XYZ Corporation acquired ABC Corporation which has the following audited condensed balance sheet: ABC Corporation Balance Sheet June 30, 2018 Assets Liabilities and Equity $ 40,000 80,000 750,000 110,000 Current Liabilities Capital Stock (90,000 $50,000 Current assets Land Buildings (net) Equipment (net) shares, $1 par value) Other Paid-in Capital Retained Earnings 90,000 40,000 800,000 $980.000 $980,000

Explanation / Answer

JOURNAL ENTRIES IN THE BOOKS OF XYZ Corporations

DATE

PARTICULARS

LEDGER FOLIO

DEBIT

CREDIT

A.

Business purchase a/c

$1120000

To liquidator of ABC a/c

$1120000

( Being considerations due for business acquired )

B.

Current assets a/c

$40000

Land a/c

$80000

Building a/c

$750000

Equipment a/c

$110000

Goodwill a/c

$190000

To current liabilities a/c

$50000

To business purchases a/c

$1120000

(Being incorporating assets and liabilities )

C.

Liquidator of ABC a/c

$1120000

To cash a/c

$370000

To stock in XYZ a/c

$50000

To securities premium a/c

$700000

(Being settlement made to liquidator of ABC )

JOURNAL ENTRIES IN THE BOOKS OF XYZ Corporations

DATE

PARTICULARS

LEDGER FOLIO

DEBIT

CREDIT

A.

Business purchase a/c

$1120000

To liquidator of ABC a/c

$1120000

( Being considerations due for business acquired )

B.

Current assets a/c

$40000

Land a/c

$80000

Building a/c

$750000

Equipment a/c

$110000

Goodwill a/c

$190000

To current liabilities a/c

$50000

To business purchases a/c

$1120000

(Being incorporating assets and liabilities )

C.

Liquidator of ABC a/c

$1120000

To cash a/c

$370000

To stock in XYZ a/c

$50000

To securities premium a/c

$700000

(Being settlement made to liquidator of ABC )

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