Please answer in detail and also make sure the answer is complete. On January 1,
ID: 2586803 • Letter: P
Question
Please answer in detail and also make sure the answer is complete.
On January 1, 2017, AMI Corporation purchased the non-cash net assets of Martinez Ltd. for $3,545,500. Following is the statement of financial position of Martinez Ltd. from the company's year-end the previous day: Martincz Ltd. Statement of Financial Position As at December 31, 2016 Cash Accounts receivable Inventory Property, plant, and equipment (net) Land 670,000 562,000 2,560,000 2,120,000 2,600,000 $8,512,000 $362,000 2,570,000 5,580,000 $8,512,000 Accounts payable Common shares Retained earnings As part of the negotiations, AMI and Martinez agreed on the following fair values for the items on Martinez's statement of financial position: Inventory Property, plant, and equipment Land Accounts payable $560,700 2,335,000 1,935,000 3,850,000 229,200Explanation / Answer
In the books of AMI corporation :
Journal Entry
Date : 01/01/2017
All amounts in Dollars ($)
Accounts Receivable A/c .......dr 560700
Inventory A/c .... dr 2335000
Plant property and Equipment .... dr 1935000
Land A/c ........dr 3850000
Goodwill A/c .......dr 93500
To Accounts Payable 229200
To Cash A/c 8545000
Total of Debits and credits : 8774200
( Being non cash assets acquired by paying cash and recording them at the fair market value. Additional 93,500 paid over the fair value of the assets which would be recorded as goodwill i.e. premium paid over and above the fair value of net assets.)