Assignment one
Problem 1: Tweedy Corporation is contemplating the purchase of the net assets of Sylvester
Corporation in anticipation of expanding its operations. The balance sheet of Sylvester
Corporation on December 31, 20X1, is as follows:
Sylvester Corporation
Balance Sheet
December 31, 20X1
Current liabilities:
Current assets:
Notes receivable
Br.24,000
Accounts payable
Br.45,000
Accounts receivable
56,000
Accrued liabilities
12,500
Inventory
31,000
Debt maturing in one year
10,000
Other current assets
18,000
Total current assets
Total current liabilities
Br.129,000
Investments
65,000
Fixed assets:
Land
Other liabilities:
Br.32,000
Building.
245,000
Equipment.
387,000
Total fixed assets
Long-term debt
Payroll & related liabilities
664,000
Br.248,000
156,000
Total other liabilities
404,000
Stockholders’ equity:
Intangibles:
Goodwill
Br. 67,500
Br.45,000
Common stock
Br.100,000
Patents
23,000
Paid-in capital in excess of par
250,000
Trade names
10,000
Retained earnings
114,500
Total intangibles
Total assets
78,000
Br.936,000
Total equity
Total liabilities and equity
464,500
Br.936,000
An appraiser for Tweedy determined the fair values of the assets and liabilities to be as follows:
ASSETS
Notes receivable
LIABILITIES
Br. 24,000
Accounts payable
Br. 45,000
Accounts receivable
56,000
Accrued liabilities
12,500
Inventory
30,000
Debt maturing in one year
Other current assets
15,000
Long-term debt
248,000
Investments
63,000
Payroll and related liabilities
156,000
Land
55,000
Building.
275,000
Equipment.
426,000
Goodwill
—
Patents
20,000
Trade names
15,000
1
10,000
The agreed-upon purchase price was Br. 580,000 in cash. Direct acquisition costs paid in cash
totaled Br. 20,000.
Required: Using the above information, prepare the entry on the books of Tweedy Corporation
to purchase the net assets of Sylvester Corporation on December 31, 20X1, using purchase
method and acquisition method
Problem 2: HT Corporation is contemplating the acquisition of the net assets of Smith
Company on December 31, 20X1. It is considering making an offer, which would include a cash
payout of Br.290,000 along with giving 10,000 shares of its Br. 2 par value common stock that is
currently selling for Br. 20 per share. The balance sheet of Smith Company is given below, along
with estimated fair values of the net assets to be acquired.
Smith Company
Balance Sheet
December 31, 20X1
Fair
Book Value
Book Value
Fair Value
Value
Current assets:
Notes receivable
Current liabilities:
Br. 33,000
Br. 33,000
Inventory
89,000
80,000
Taxes payable
Prepaid expenses
15,000
15,000
Interest payable
Br. 137,000
Br.128,000
Br. 36,000
Br. 55,000
Total current assets
Investments
Fixed assets:
Land
Br. 90,000
Building.
115,000
170,000
Equipment.
256,000
250,000
32,000
25,000
Br. 418,000
Br.535,000
Total fixed assets
Bonds payable
Discount on bonds payable
Total other liabilities
Br. 56,000
Br. 70,000
Common stock
Paid-in capital in excess of par
Retained earnings
Total equity
Total assets
Br. 63,000
15,000
15,000
3,000
3,000
Br. 81,000
Br. 81,000
Br. 250,000 Br.250,000
(18,000)
(30,000)
Br. 232,000
Br.220,000
Stockholders’ equity:
Intangibles:
Franchise
Total current liabilities
Br. 63,000
Other liabilities:
Br. 15,000
Vehicles
Accounts payable
Br. 647,000
Br.788,000
Total liabilities and equity
Br. 50,000
200,000
84,000
Br. 334,000
Br. 647,000
Required: Prepare the entry on the books of HT Corporation to record the acquisition of Smith
Companyusing purchase method and acquisition method
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