In preparation for a possible business combination, a team of experts from Boogi
ID: 2419620 • Letter: I
Question
In preparation for a possible business combination, a team of experts from Boogie Musical made a thorough examination and audit of Toot-Toot Tuba. They found that Toot-Toot’s assets and liabilities were correctly stated except that they estimated uncollectible accounts at $2,400. The experts also estimated the market value of the inventory at $45,000 and the market value of the plant and equipment at $515,000. The business combination took place on January 1, 20X6, and on that date Boogie Musical acquired all the assets and liabilities of Toot-Toot Tuba. On that date, Boogie’s common stock was selling for $55 per share.
Record the combination on Boogie’s books assuming that Boogie issued 8,800 of its $11 par common shares in exchange for Toot-Toot’s assets and liabilities. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
References
eBook & Resources
Journal EntriesDifficulty: 3
BOOGIE MUSICAL CORPORATION Balance Sheet December 31, 20X5 Assets Liabilities & Equities Cash $ 27,000 Accounts Payable $ 44,000 Accounts Receivable 86,000 Notes Payable 53,000 Allowance for Uncollectible Accounts (1,600 ) Mortgage Payable 180,000 Inventory 207,000 Bonds Payable 180,000 Plant & Equipment 991,000 Capital Stock ($11 par) 493,000 Accumulated Depreciation (176,000 ) Premium on Capital Stock 900 Other Assets 26,000 Retained Earnings 208,500 Total Assets $ 1,159,400 Total Liabilities & Equities $ 1,159,400Explanation / Answer
Calculation of Value of Assets Acquired Cash 500 Accounts Receivables 22000 Allowance for Uncollectible accounts -2400 Inventory 45000 Plant & equipment 515000 Other Assets 26200 Accounts Payable -9200 Notes Payable -24000 Mortgage Payable -61000 Bonds Payable -115000 Fair Value of assets Acquired 397100 Purchase Consideration Value of Shares Transferred 484000 (8800 shares X $55) Excess to goodwill 86900 Entry in the Books of Boogie's Book Cash Dr. 500 Accounts Receivables Dr. 22000 Inventory Dr. 45000 Plant & equipment Dr. 515000 Other Assets Dr. 26200 Goodwill Dr. 86900 To Allowance for Uncollectible accounts 2400 To Accounts Payable 9200 To Notes Payable 24000 To Mortgage Payable 61000 To Bonds Payable 115000 To Common Stock 96800 To Premium on Capital Stock 387200