Journal entry on partners books for the acquisition

Assignment Help Financial Accounting
Reference no: EM135850

1) Baker Company is considering the acquisition of Charley, Inc. To assess the amount it may be willing to pay, Baker makes the subsequent computations and assumptions.

A) Charley, Inc. has identifiable assets with a total fair value of $ 8,000,000 and liabilities of $ 4,500,000. The assets add office equipment with a fair value approximating book value, buildings with a fair value 30 percent higher than book value, and land with a fair value 40 percent higher than book value. The remaining lives of the assets are deemed to be approximately equal to those used by Charley, Inc.

B) Charley, Inc.'s pretax incomes for the years 2009 through 2011 were $ 550,000, $ 640,000, and $ 450,000, respectively. Perkins believes that an average of these earnings shows a fair estimate of annual earnings for the indefinite future. Thus, it may need to consider adjustments for the subsequent items included in pretax earnings: Depreciation on Buildings (each year) 270,000, Depreciation on Equipment (each year) 40,000, Extraordinary Loss (year 2011) 150,000, Salary Expense (each year) 180,000.

C) The normal rate of return on net assets for the industry is 16 percent. Required:

A) Suppose that Baker feels that it must earn 15% return on its investment, and that goodwill is evaluate by capitalizing excess earnings. Based on these assumptions, determine a reasonable offering price for Charley, Inc. show how much of the price consists of goodwill.

B) Consider that Baker feels that it must earn a 20% return on its investment, but that average excess earnings are to be capitalized for four years only. Based on these assumptions, determine a reasonable offering price for Charley, Inc. show how much of the price consists of goodwill.

2) Balance sheet information for Sizemic Corporation at 1st January, 2011, is summarized as given: existing assets 830,000, Plant assets 1,900,000, liabilities 1,300,000, capital stock $ 10 par 900,000, Retained earnings 530,000. Sizemic's assets and liabilities are fairly valued except for plant assets that are undervalued by $ 300,000. On 2nd January, 2011, Partner Corporation issues 70,000 shares of its $ 10 par value common stock for all of Sizemic's net assets and Sizemic is dissolved. Market quotations for the two stocks on this date are:

Partner common: $ 30,

Sizemic common: $ 20.

Pell pays the followings fees and costs in connection with the combinations:

Finder's fee $ 15,000, Costs of issuing and registering stock 6,000, Accounting and Legal fees 4,000.

Required:

Purpose the journal entry on Partner's books for the acquisition of Sizemic Corporation's net assets.

Reference no: EM135850

Questions Cloud

Evaluate earnings per share : Evaluate Earnings per Share for the year ended 31 st December, 2012 and Determine Earnings Per Share for 2012.
How to figure that the peeling and cooking losses : A man and a woman are both carriers for 2 autosomal recessive disorders, PKU and cystic fibrosis. If they have a daughter, what is the possibility that she will have PKU but not cystic fibrosis.
Business magazine that computer firms : You read in a business magazine that computer firms are reaping high profits. Assume that the computer market is perfectly competitive.
Panels hang perpendicularly from the side of a dock : Utilize your imagination to describe two ways in which disturbance of the sort just described may affect the animals that live on the panels and amount of free space available.
Journal entry on partners books for the acquisition : Purpose the journal entry on Partner's books for the acquisition of Sizemic Corporation's net assets.
Health and clinical medicine relationships in our country : What do you see as the primary impacts of health care reform on the public health and clinical medicine relationships in our country. Do you see these changes as positive or negative overall
Results of drilling : Results of drilling are 15 dry holes, 12 gas producers, 18 oil wells, and 20 wells producing both oil and gas.
Understanding of transformational and transactional leaders : How could you explain the occurrence of birth defects (caused by altered genes) in children and grandchildren of WWII atomic bomb victims, while the victims themselves were only mildly affected.
What are importance and measurement of patient satisfaction : What are the importance of and measurement of patient satisfaction in the evaluation of U.S. health care? In your view what are the most significant steps that could be taken to improve patient satisfaction with health care services

Reviews

Write a Review

Financial Accounting Questions & Answers

  Financial statement analysis and preparation

Financial Statement Analysis and Preparation

  Shareholder of a company

Describe the ways that a person can become a shareholder of a company. Why Wal-Mart would split its stock?

  Financial and accounting principles

An understanding of financial and accounting principles can be a valuable tool for managers. While not all managers will find themselves calculating financial ratios or preparing annual financial data.

  Prepare a statement of cash flow using the direct method

Prepare a Statement of Cash Flow using the Direct Method and Prepare the Operations section of the Statement of Cash Flow using the Indirect Method.

  Financial accounting assignment

This assignment has one case study and two question apart from case study. Questions related to document Liquidation question and Company financial statements question - Torquay Limited

  Prepare general journal entries for goela

Prepare general journal entries for Goela Ltd

  Principles of financial accounting

Prepare the journal entry to record the acquisition of the assets.

  Prepare general journal entries to record the transactions

Prepare general journal entries to record the transactions, assuming use of the periodic inventory system

  Global reporting initiative

Compare the view espoused by the economist Milton Friedman about the social responsibilities of business with the views express by Stigler.

  Explain the iasb conceptual frameworks

Explain the IASB Conceptual Framework's perspective of users and their decisions.

  Determine the company''s financial statements

T he focus of the report is to determine the extent to which you are comfortable relying on the financial statements as presented by management .

  Computation of free cash flow

Computation of Free Cash Flow

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd