220951999 Test Bank for Advanced Accounting 11th Edition by Beams

Ex e r c i s e s

1 )Pa r r o tI nc o r por a t e dpur c ha s e dt hea s s e t sa ndl i a bi l i t i e so fS pa r r o w Compa nya tt hec l os eo fb us i ne s s o nDe c e mb mbe r3 1 ,2 0 11 .Pa r r o tb or r o we we d$ 2 , 0 0 0 , 0 0 0t oc o mp mpl e t et hi st r a ns a c t i on, i na ddi t i o nt ot he$ 64 0 , 0 0 0 c a s ht ha tt he ypa i ddi r e c t l y .Thef a i rv a l uea ndbo okv al ueofS pa r r o w' w' sr e c or de da s s e t sa ndl i a bi l i t i e sa s oft heda t eofa c qui s i t i ona r el i s t e dbe l o w. w.I na ddi t i on,S pa r r o w ha dapa t e ntt ha tha daf a i rv a l ueof $ 50 , 0 0 0.

Cas h I nve nt or i e s Ot he rc ur r e ntas s e t s Land Pl a nta s s e t s e t -n Tot alAs s e t s Ac c ount spa yabl e Not e spa yabl e Capi t als t oc k,$5par Addi t i ona lpa i d-i nc api t a l Re t ai ne dEar ni ngs Tot alLi abi l i t i e s&Equi t i e s

Bo okVa l ue $12 0, 00 0 22 0, 00 0 63 0, 00 0 27 0, 00 0 4, 65 0, 00 0 $5, 890, 000

Fai rVa l ue $120, 000 250, 000 600, 000 320, 000 4, 600, 000

$ 1, 20 0, 00 0 2, 10 0, 00 0 70 0, 00 0 1, 40 0, 00 0 49 0, 00 0 $ 5, 89 0, 00 0

$1, 200, 000 2, 100, 000

Requi r ed: 1 . Pr e pa r eP a r r o t ' sg e ne r a lj o ur n a le nt r yf o rt hea c q ui s i t i onofS pa r r o w,a s s umi ngt ha tS pa r r o ws u r vi v e s a sas e pa r at el e ga le nt i t y . 2 . Pr e pa r eP a r r o t ' sg e ne r a lj o ur n a le nt r yf o rt hea c q ui s i t i onofS pa r r o w,a s s umi ngt ha tS pa r r o w wi l l di s s o l vea sas e pa r a t el e ga le nt i t y . Answer : 1 .Ge ne r a lj o ur n a le nt r yr e c o r de db yPa r r o tf ort hea c q ui s i t i o nofS pa r r o w( S pa r r o ws u r vi v e sa sa s e pa r at el e ga le nt i t y) : I nve s t me nti nSpar r ow Cas h Not e sPa ya bl e

2, 64 0, 00 0 64 0, 0 00 2, 00 0, 0 00

1 Co py r i g ht©2 0 1 2Pe a r s o nEduc a t i o n,I nc . Pub l i s h i ngasP r e n t i c eHa l l

2 .Ge ne r a lj o ur n a le nt r yr e c or de db yPa r r o tf ort hea c qui s i t i o nofS pa r r o w( S pa r r o w di s s ol v e sa sa s e pa r at el e ga le nt i t y) : Cas h I nve nt or i e s Ot he rc ur r e ntas s e t s Land Pl antas s e t s Pat e nt Ac c ount spa yabl e Not e spa ya bl e Cas h Not e sPa ya bl e

12 0, 00 0 25 0, 00 0 60 0, 00 0 32 0, 00 0 4, 60 0, 00 0 5 0, 00 0 1, 20 0, 0 00 2, 10 0, 0 00 640, 000 2, 00 0, 0 00

Ob j e c t i v e :LO4 Di fficul t y:Moder at e

2 )OnJ a nua r y2 ,2 0 1 1Pi r o nCo r po r a t i o ni s s ue d1 0 0 , 0 0 0ne ws h a r e so fi t s$ 5pa rv a l uec o mmo ns t o c k v al ue da t$ 1 9as ha r ef o ra l lofS e anaCor p or a t i on' sout s t a ndi ngc ommo ns h a r e s . Pi r o npa i d$ 1 5, 0 0 0t o r e g i s t e ra ndi s s ues ha r e s . Pi r o na l s opa i d$ 20 , 0 00f ort hedi r e c tc o mbi na t i onc o s t so ft hea c c ount a nt s . The f a i rv al uea ndbo okv al ueofS e ana ' si de nt i fia bl ea s s e t sa ndl i a bi l i t i e swe r et hes a me .S umma r i z e dba l a nc e s he e ti nf or ma t i onf orbo t hc ompa ni e sj us tbe f or et hea c qui s i t i ononJ a nua r y2,2 0 11i sa sf ol l o ws :

Cas h I nve nt or i e s Ot he rc ur r e ntas s e t s Land Pl a nta s s e t s e t -n Tot alAs s e t s

Pi r on $150, 000 320, 000 500, 000 350, 000 4, 000, 000 $5, 320, 000

Se ana $120, 000 400, 000 500, 000 250, 000 1, 500, 000 $2, 770, 000

Ac c ount spa yabl e Not e spa yabl e Capi t als t oc k,$5par Addi t i ona lpa i d-i nc api t a l Re t ai ne dEar ni ngs Tot alLi abi l i t i e s&Equi t i e s

$1, 000, 000 1, 300, 000 2, 000, 000 1, 000, 000 20, 000 $5, 320, 000

$300, 000 660, 000 500, 000 100, 000 1, 210, 000 $2, 770, 000

Requi r ed: 1 .Pr e pa r ePi r o n' sg e ne r a lj our n ale nt r yf ort hea c qui s i t i onofS e ana ,a s s umi ngt ha tS ea nas ur v i v esa sa s e pa r at el e ga le nt i t y . 2 .Pr e pa r ePi r o n' sg e ne r a lj our n ale nt r yf ort hea c qui s i t i onofS e ana ,a s s umi ngt ha tS ea nawi l ldi s s ol v ea s as e pa r a t el e ga le nt i t y .


Answer : 1 .Ge ne r a lj our n ale nt r yr e c o r de db yPi r o nf ort hea c qui s i t i onofS ea na( S ea nas ur v i v esa sas e pa r a t el e ga l e nt i t y) : I nve s t menti nSe ana Commons t oc k Addi t i o na lpa i d-i nc a pi t al I nve s t me nte xpe ns e Addi t i ona lpa i d-i nc api t a l Cas h

1, 900, 000 500, 000 1, 400, 000 20, 000 15, 000 35, 000

2 .Ge ne r a lj our n ale nt r yr e c o r de db yPi r o nf ort hea c qui s i t i onofS ea na( S ea nadi s s ol v esa sas e pa r a t el e ga l e nt i t y) : Cas h I nve nt or i e s Ot he rc ur r e ntas s e t s Land Pl antas s e t s Go odwi l l I nve s t me nte xpe ns e Ac c ount spa yabl e Not e spa ya bl e Commons t oc k Addi t i o na lpa i d-i nc a pi t al

85, 000 400, 000 500, 000 250, 000 1, 500, 000 9 0 , 0 0 0 20, 000 300, 000 660, 000 500, 000 1, 385, 000

Ob j e c t i v e :LO4 Di fficul t y:Di fficul t


3 )AtDe c e mb e r3 1 ,2 0 1 1 ,Pa ndo r aI nc o r p or a t e di s s ue d4 0 , 0 0 0s ha r e so fi t s$ 2 0pa rc o mmo ns t o c kf o ra l l t heo ut s t a ndi ngs ha r e so ft heS opho c l e sCo mpa n y .I na ddi t i o n,P ando r aa g r e e dt opa yt heo wne r so f S ophoc l e sa na ddi t i ona l$ 2 00 , 0 0 0i fas pe c i ficc o nt r a c ta c hi e v edt hepr o fitl e ve l st ha twe r et a r g e t e db yt he o wne r so fS o pho c l e si nt he i rs a l ea gr e e me nt .Thef a i rv a l ueoft hi sa mo unt ,wi t ha na gr e e dl i ke l i hoo do f o c c ur r e nc ea nddi s c o unt e dt opr e s e n tv a l ue ,i s$ 1 6 0, 0 0 0.I na ddi t i o n,Pa ndor apa i d$ 1 0 , 0 0 0i ns t oc ki s s ue c o s t s , $ 40 , 0 00i nl e ga lf e e s ,a nd$ 48 , 0 00t oe mpl o ye e swhowe r ede di c a t e dt ot hi sa c qui s i t i onf ort hel a s t t hr e emo nt hso ft hey e a r .S umma r i z e db a l a nc es he e ta ndf a i rv a l uei nf o r ma t i o nf o rS opho c l e s i mme di a t e l ypr i ort ot hea c qui s i t i onf ol l o ws .

Cas h Ac c ount sRe c e i vabl e I nve nt or y Bui l di ngsandEqui pme nt( ne t ) Tr a de ma r ksa ndTr ade name s Tot alAs s e t s Ac c ount sPa yabl e Not e sPa yabl e Re t ai ne dEar ni ngs Tot alLi abi l i t i e sandEqui t y

Bo okVal ue $100, 000 280, 000 520, 000 750, 000 0 $1, 650, 000 $200, 000 900, 000 550, 000 $1, 650, 000

Fai rVa l ue $ 100, 000 250, 000 640, 000 870, 000 500, 000 $ 190, 000 900, 000

Requi r ed: 1 . Pr e pa r ePa ndo r a ' sg e ne r a lj o ur na le nt r yf o rt hea c qui s i t i o no fS o pho c l e sa s s u mi ngt ha tP ando r a ' s s t oc kwa st r a di nga t$ 3 5a tt heda t eofa c qui s i t i ona ndS ophoc l e sdi s s ol v esa sas e pa r a t el e ga le nt i t y . 2 . Pr e pa r ePa ndo r a ' sg e ne r a lj o ur na le nt r yf o rt hea c qui s i t i o no fS o pho c l e sa s s u mi ngt ha tP ando r a ' s s t oc kwa st r a di nga t$ 3 5a tt heda t eofa c qui s i t i ona ndS ophoc l e sc o nt i nue sa sas e pa r a t el e ga le nt i t y . 3 . Pr e pa r ePa ndo r a ' sg e ne r a lj o ur na le nt r yf o rt hea c qui s i t i o no fS o pho c l e sa s s u mi ngt ha tP ando r a ' s s t oc kwa st r a di nga t$ 2 5a tt heda t eofa c qui s i t i ona ndS ophoc l e sdi s s ol v esa sas e pa r a t el e ga le nt i t y . 4 . Pr e pa r ePa ndo r a ' sg e ne r a lj o ur na le nt r yf o rt hea c qui s i t i o no fS o pho c l e sa s s u mi ngt ha tP ando r a ' s s t oc kwa st r a di nga t$ 2 5a tt heda t eofa c qui s i t i ona ndS ophoc l e ss ur v i v esa sas e pa r a t el e ga le nt i t y .


Answer : 1 .At$ 35pe rs h ar e , a s s umi ngSophoc l e sdi s s ol v esa sas e pa r a t el e ga le nt i t y: Cas h Ac c ount sRe c e i vabl e I nve nt or y Bui l di ngsandEqui pme nt Tr a de ma r ks /Tr adename s Goodwi l l Ac c ount spa yabl e Cont i nge ntLi abi l i t y Not e spa yabl e Commons t oc k Addi t i o na lpa i d-i nc api t al I nve s t me nte xpe ns e Addi t i ona lpa i d-i nc api t a l Cas h

$100, 000 250, 000 640, 000 870, 000 500, 000 290, 000 19 0, 0 00 16 0, 0 00 90 0, 0 00 80 0, 0 00 60 0, 0 00 40, 000 10, 000 5 0, 0 00

NOTE:Amountpai dt oempl oyeesdedi cat edt ot heac qui s i t i onwoul dber out i nel yexpensedt hr ough c o mpa n ypa y r o l la ndha v enos e pa r a t ei mpa c to nt hea c q ui s i t i o ne nt r y . 2 .At$ 3 5pe rs ha r e , a s s umi ngS opho c l e sc o nt i nue sa sas e pa r a t el e g ale nt i t y : I nve s t me nti nSophoc l e s Cont i nge ntLi a bi l i t y Commons t oc k Addi t i ona lpa i d-i nc api t al I nve s t me nte xpe ns e Addi t i ona lpa i d-i nc api t a l Cas h

1, 560, 000 1 6 0, 0 0 0 80 0, 00 0 60 0, 0 00 40, 000 10, 000 5 0, 0 00

NOTE:Amountpai dt oempl oyeesdedi cat edt ot heac qui s i t i onwoul dber out i nel yexpensedt hr ough c o mpa n ypa y r o l la ndha v enos e pa r a t ei mpa c to nt hea c q ui s i t i o ne nt r y .


3 .At$ 25pe rs h ar e , a s s umi ngSophoc l e sdi s s ol v esa sas e pa r a t el e ga le nt i t y: Cas h Ac c ount sRe c e i vabl e I nve nt or y Bui l di ngsandEqui pme nt Tr a de ma r ks /Tr adename s Ac c ount spa yabl e Cont i nge ntLi a bi l i t y Not e spa yabl e Ga i nonba r ga i npur c ha s e Commons t oc k Addi t i ona lpa i d-i nc api t al I nve s t me nte xpe ns e Addi t i ona lpa i d-i nc api t a l Ca s h

$100, 000 250, 000 640, 000 870, 000 500, 000 19 0, 0 00 1 6 0, 0 0 0 90 0, 0 00 11 0, 0 00 80 0, 0 00 20 0, 0 00 40, 000 10, 000 5 0 , 0 0 0

NOTE:Amountpai dt oempl oyeesdedi cat edt ot heac qui s i t i onwoul dber out i nel yexpensedt hr ough c o mpa n ypa y r o l la ndha v enos e pa r a t ei mpa c to nt hea c q ui s i t i o ne nt r y . 4 .At$ 2 5pe rs ha r e , a s s umi ngS ophoc l e sc o nt i nue sa sas e pa r a t el e g ale nt i t y : I nve s t me nti nSophoc l e s Cont i nge ntLi a bi l i t y Commons t oc k Addi t i ona lpa i d-i nc api t al I n ve s t me nte x pe ns e Addi t i ona lpa i d-i nc api t a l Cas h

1, 160, 000 16 0, 0 00 80 0, 0 00 20 0, 0 00 4 0 , 0 0 0 10, 000 5 0, 0 00

NOTE:Amountpai dt oempl oyeesdedi cat edt ot heac qui s i t i onwoul dber out i nel yexpensedt hr ough c o mpa n ypa y r o l la ndha v enos e pa r a t ei mpa c to nt hea c q ui s i t i o ne nt r y . Ob j e c t i v e :LO4 Di fficul t y:Di fficul t


4)OnJ anuar y2,2011Pal t aCompanyi s s ued80, 000new s har esofi t s$5parval uecommons t ockval uedat $ 1 2as ha r ef o ra l lo fS udi naCo r po r a t i o n' so ut s t a ndi ngc o mmons h a r e s . Pa l t apa i d$ 5 , 0 0 0f o rt hedi r e c t c o mbi na t i onc o s t so ft hea c c ount a nt s . Pa l t apa i d$ 1 8, 0 0 0t or e gi s t e ra ndi s s ues ha r e s . Thef a i rv a l uea nd bookval ueofSudi na ' si de nt i fiabl ea s s e t sandl i a bi l i t i e swe r et hes ame .Summar i ze dbal anc es he e t i nf or ma t i onf orbo t hc ompa ni e sj us tbe f or et hea c qui s i t i ononJ a nua r y2,2 0 11i sa sf ol l o ws :


Pal t a $7 5, 00 0 16 0, 00 0 20 0, 00 0 17 5, 00 0 1, 50 0, 00 0 $ 2, 11 0, 00 0

Sudi na $6 0, 0 00 20 0, 0 00 25 0, 0 00 12 5, 0 00 75 0, 0 00 $1, 3 85, 00

Ac c ount spa yabl e Not e spa yabl e Capi t als t oc k,$2par Addi t i ona lpa i d-i nc api t a l Re t ai ne dEar ni ngs Tot alLi abi l i t i e s&Equi t y

$10 0, 00 0 70 0, 00 0 60 0, 00 0 45 0, 00 0 26 0, 00 0 $ 2, 11 0, 00 0

$15 5, 0 00 33 0, 0 00 25 0, 0 00 5 0, 0 00 60 0, 0 00 $ 1, 38 5, 0 00

Requi r ed: 1 . Pr e pa r eP a l t a ' sg e ne r a lj o ur n a le nt r yf o rt hea c q ui s i t i onofS udi naa s s umi ngt ha tS udi nas ur v i v e sa sa s e pa r at el e ga le nt i t y . 2 . Pr e pa r eP a l t a ' sg e ne r a lj o ur n a le nt r yf o rt hea c qui s i t i onofS udi naa s s u mi ngt ha tS udi nawi l ldi s s ol v e a sas e pa r at el e ga le nt i t y . Answer : 1 .Ge ne r a lj our n ale nt r yr e c or de db yPa l t af ort hea c qui s i t i onofS udi na( S udi nas ur v i v esa sas e pa r a t e l e gale nt i t y) : I nve s t me nti nSudi na Commons t oc k Addi t i o na lpa i d-i nc api t al I n ve s t me nte x pe ns e Addi t i ona lpa i d-i nc api t a l Cas h

960, 000 40 0, 00 0 56 0, 0 00 5 , 0 0 0 18, 000 2 3, 0 00


2 .Ge ne r a lj our n ale nt r yr e c o r de db yPa l t af ort hea c qui s i t i onofS udi na( S udi nadi s s ol v esa sas e pa r a t e l e gale nt i t y) : Cas h I nve nt or i e s Ot he rc ur r e ntas s e t s Land Pl antas s e t s Goodwi l l I nve s t me nte xpe ns e Ac c ount spa yabl e Not e spa yabl e Commons t oc k Addi t i o na lpa i d-i nc api t al

37, 000 2 0 0, 0 00 250, 000 125, 000 750, 000 60, 000 5, 000 15 5, 0 00 33 0, 0 00 40 0, 0 00 54 2, 0 00


5 )S a ve e dCo r po r a t i o npur c ha s e dt hene ta s s e t so fPe nn yI nc . o nJ a nua r y2 ,2 0 11f o r$ 1 , 6 9 0, 0 0 0c a s ha nd a l s opa i d$ 15 , 0 00i ndi r e c ta c qui s i t i onc os t s . Pe nnydi s s o l ve da soft heda t eoft hea c qui s i t i on.Pe nny' s bal a nc es he e tonJ anuar y2,2011wasasf ol l ows : Ac c o unt sr e c e i v abl e-ne t I nve nt or y Land Bui l di ng-ne t Equi pme nt e t -n Tot alas s e t s

$19 0, 00 0 48 0, 00 0 1 0, 00 0 63 0, 00 0 24 0, 00 0 $1 , 65 0, 00 0

Cur r e ntl i abi l i t i e s Longt e r m de bt Commons t oc k( $1pa r ) Pai d-i nc api t a l Re t ai ne de a r ni ngs Tot all i ab.& e qui t y

$235, 000 650, 000 25, 000 150, 000 590, 000 $1, 650, 000

F a i rv al ue sa g r e ewi t hb ookva l ue se x c e p tf ori n ve nt o r y , l a nd,a nde qui pme nt ,whi c hha v ef a i rv al ue so f $ 64 0 , 0 0 0,$ 14 0 , 0 00a nd$ 23 0, 0 00 ,r e s pe c t i v el y .Pe nnyha sc us t ome rc o nt r a c t sva l ue da t$ 20 , 0 0 0. Requi r ed: Pr e pa r eS a ve e d' sg e ne r a lj our n a le n t r yf ort hec a s hpur c ha s eofPe nn y' sne ta s s e t s . Ans we r :Ge ne r a lj our n a le nt r yf ort hepur c ha s eo fP e nn y' sn e ta s s e t s : Ac c ount sr e c e i va bl e I nve nt or y Land Bui l di ng Equi pme nt Cus t ome rc ont r a c t s Goodwi l l I nve s t me nte xpe ns e Cur r e ntl i a bi l i t i e s Long-t e r m de bt Cas h

190, 000 640, 000 140, 000 630, 000 230, 000 20, 000 725, 000 15, 000 235, 000 650, 000 1, 705, 000

Ob j e c t i v e :LO4 Di fficul t y:Moder at e 8 Co py r i g ht©2 0 1 2Pe a r s o nEduc a t i o n,I nc . Pub l i s h i ngasP r e n t i c eHa l l

6 )Bi gg aCor p or a t i onpur c ha s e dt hene ta s s e t so fP e t i t , I nc . onJ a nua r y2 ,2 0 1 1f or$ 3 8 0 , 0 0 0c a s ha nda l s o pa i d$ 15 , 0 00i ndi r e c ta c qui s i t i onc os t s .Pe t i t ,I nc .wa sdi s s ol ve dont heda t eoft heac qui s i t i on.Pe t i t ' s bal a nc es he e tonJ anuar y2,2011wasasf ol l ows : Ac c o unt sr e c e i v abl e-ne t I n ve nt o r y Land Bui l di ng-ne t Equi pme nt e t -n Tot alas s e t s

$90, 000 2 2 0 , 0 0 0 30, 000 20, 000 40, 000 $ 400, 000

Cur r e ntl i abi l i t i e s Lo ngt e r m de b t Commons t oc k( $1pa r ) Addt l .pai d-i nc a pi t al Re t ai ne de ar ni ngs Tot all i ab.&e qui t y

$ 75, 0 00 8 0 , 0 0 0 10, 0 00 2 15, 0 00 20, 0 00 $4 00, 0 00

F a i rv al ue sa g r e ewi t hb ookva l ue se x c e p tf ori n ve nt o r y , l a nd,a nde qui pme nt ,whi c hha v ef a i rv al ue so f $ 26 0, 0 00 ,$ 35 , 0 00and$ 35 , 0 00 ,r e s pe c t i ve l y .Pe t i tha spa t e ntr i ght swi t haf a i rv a l ueof$ 20 , 0 00 . Requi r ed: Pr e pa r eBi gga ' sge ne r a lj our n ale nt r yf ort hec as hpur c ha s eofPe t i t ' sne ta s s e t s . Ans we r :Ge ne r a lj our n ale nt r yf ort hepur c ha s eofPe t i t ' sn e ta s s e t s : Ac c ount sr e c e i va bl e I nve nt or y Land Bui l di ng Equi pme nt Pat e nt Goodwi l l I nve s t me nte xpe ns e Cur r e ntl i abi l i t i e s Long-t e r m de bt Cas h

90, 000 260, 000 35, 000 20, 000 35, 000 20, 000 75, 000 15, 000 7 5, 0 00 8 0, 0 00 39 5, 0 00



7)Thebal ances heet sofPal i s adeCompanyandSal i s bur yCorpor at i onwer easf ol l owsonDec ember31, 2010:

Cur r e ntAs s e t s Equi pme nt e t -n Bui l di ngs e t -n Land Tot alAs s e t s Cur r e ntLi abi l i t i e s CommonSt oc k,$5pa r Addi t i o na lpa i d-i nCapi t al Re t ai ne dEar ni ngs Tot a lLi a bi l i t i e sa nd St oc khol de r s ' e qui t y

Pal i s ade $ 260, 000 440, 000 600, 000 100, 000 $1, 400, 000 100, 000 1, 000, 000 100, 000 200, 000

Sa l i s bur y $1 20, 0 00 4 80, 0 00 2 00, 0 00 2 00, 0 00 $ 1, 0 00, 0 00 1 20, 0 00 4 00, 0 00 2 80, 0 00 2 00, 0 00

$1, 400, 000

$ 1, 0 00, 0 00

OnJ a nua r y1 ,2 0 1 1Pa l i s a dei s s ue d3 0 , 0 0 0ofi t ss ha r e swi t hama r k e tv al ueo f$ 4 0pe rs h a r ei ne x c ha ng e f ora l lofS al i s b ur y ' ss ha r e s , a ndS al i s b ur ywa sdi s s ol v ed.Pa l i s a depa i d$ 20 , 0 00t or e gi s t e ra ndi s s uet h e ne wc o mmo ns h a r e s .I tc o s tPa l i s a d e$ 5 0 , 0 0 0i ndi r e c tc o mb i na t i o nc o s t s . Bo okv a l ue se q ua lma r k e tv a l ue s e x c e ptt ha tS al i s b ur y ' sl a ndi swo r t h$ 25 0 , 0 0 0. Requi r ed: Pr e pa r eaP a l i s a deba l a nc es he e ta f t e rt heb us i ne s sc o mb i na t i o no nJ a nua r y1, 2 0 11 . Ans we r :Theba l a nc es h e e tf o rPa l i s a deCo r po r a t i o ns ub s e que ntt oi t sa c q ui s i t i o no fS a l i s b ur y Cor p or a t i ononJ a n ua r y1 ,2 0 1 1wi l la ppe a ra sf ol l o ws : Cur r e ntAs s e t s Equi pme nt e t -n Bui l di ngs e t -n Land Goodwi l l Tot alAs s e t s Cur r e ntLi abi l i t i e s CommonSt oc k,$5pa r Addi t i o na lpa i d-i nCa pi t al Re t ai ne dEar ni ngs Tot a lLi a bi l i t i e sa nd St oc khol de r s ' e qui t y

$ 310, 000 920, 000 800, 000 350, 000 270, 000 $2, 650, 000 220, 000 1, 150, 000 1, 130, 000 150, 000 $2, 650, 000

No t et ha tCur r e n tAs s e t so f$ 3 1 0, 0 0 0r e s ul t sf r om t het woc ompa ni e sc o nt r i but i ng$2 6 0, 0 0 0and$ 1 2 0, 0 0 0, l e s st hec a s hpa i doutdur i ngt h eac q ui s i t i onpr o c e s sof$ 70 , 0 00 .Re t a i ne dEa r ni ngso ft hepa r e nti s r e duc e df o rt heI n ve s t me ntEx pe ns ei nc ur r e di nt hepr oc e s so f$ 5 0 , 0 0 0 . Ob j e c t i v e :LO4 Di fficul t y:Moder at e


8 )OnJ a nua r y2,2 0 1 1,Pi l a t e sI nc . pa i d$ 9 00 , 0 0 0f o ra l loft heout s t a ndi ngc o mmons t o c ko fS pi nni ng Company, anddi s s ol vedSpi nni ngCompany.Thec ar r yi ngval uesf orSpi nni ngCompany' sas s et sand l i a bi l i t i e sar er e c or de dbe l o w. Cas h Ac c ount sRe c e i vabl e Copyr i ght s( pur c has e d) Goodwi l l Li abi l i t i e s Ne tas s e t s

$ 200, 000 220, 000 400, 000 120, 000 ( 180, 000) $ 760, 000

OnJ a nua r y2,2 0 11 ,S pi nni ngant i c i pa t e dc o l l e c t i ng$1 8 5, 0 0 0oft her e c or de dAc c o unt sRe c e i va bl e .Pi l a t e s e nt e r e di nt ot hea c q ui s i t i o nbe c a us eS pi nni ngha dCo pyr i ght st ha tPi l a t e swi s h e dt oown,a nda l s o unr e c o r de dpa t e nt swi t haf a i rv a l ueof$ 1 0 0, 0 0 0. Requi r ed: Ca l c ul a t et hea mo untofgo odwi l lt ha twi l lber e c o r de do nPi l a t e ' sb al a nc es h e e ta so ft heda t eof a c qui s i t i on. Ans we r :Go odwi l li sc a l c ul a t e da sf ol l o ws : Pur c has epr i c e

$ 900, 000

F ai rv al ueofne ta s s e t s : Cas h Ac c ount sRe c e i vabl e Copyr i ght s Pat e nt s Li abi l i t i e s Tot al Pur c ha s epr i c ei ne x c e s so f f a i rval ueofne tas s e t s :

$20 0, 00 0 18 5, 00 0 40 0, 00 0 10 0, 00 0 ( 180, 000) ( 705, 000) $ 195, 000

Pi l a t e swoul dr e c o r d$1 9 5, 0 0 0f orGoodwi l la sar e s ul toft hea c qui s i t i on. Ob j e c t i v e :LO4 Di fficul t y:Moder at e


9 )OnJ a nua r y2,2 0 1 1,Pi l a t e sI nc . pa i d$ 7 00 , 0 0 0f o ra l loft heout s t a ndi ngc o mmons t o c ko fS pi nni ng Company, anddi s s ol vedSpi nni ngCompany.Thec ar r yi ngval uesf orSpi nni ngCompany' sas s et sand l i a bi l i t i e sar er e c or de dbe l o w. Cas h Ac c ount sRe c e i vabl e Copyr i ght s( pur c has e d) Goodwi l l Li abi l i t i e s Ne tas s e t s

$ 200, 000 220, 000 400, 000 120, 000 ( 180, 000) $ 760, 000

OnJ a nua r y2,2 0 11 ,S pi nni ngant i c i pa t e dc o l l e c t i ng$1 8 5, 0 0 0oft her e c or de dAc c o unt sRe c e i va bl e .Pi l a t e s e nt e r e di nt ot hea c q ui s i t i o nbe c a us eS pi nni ngha dCo pyr i ght st ha tPi l a t e swi s h e dt oown,a nda l s o unr e c o r de dpa t e nt swi t haf a i rv a l ueof$ 1 0 0, 0 0 0. Requi r ed: Ca l c ul a t et hea mo untofgo odwi l lt ha twi l lber e c o r de do nPi l a t e ' sb al a nc es h e e ta so ft heda t eof a c qui s i t i on.The nr e c o r dt h ej our n ale nt r yPi l a t e swoul dr e c o r dont he i rbookst or e c or dt hea c qui s i t i on. Ans we r :Go odwi l li sc a l c ul a t e da sf ol l o ws : Pur c has epr i c e

$70 0, 00 0

F ai rv al ueofne ta s s e t s : Cas h Ac c ount sRe c e i vabl e Copyr i ght s Pat e nt s Li abi l i t i e s Tot al Fa i rv al ueofne ta s s et si n e x c e s sofPur c has epr i c e :

$200, 000 185, 000 400, 000 100, 000 ( 180 , 000 ) ( 705, 000) $( 5, 000)

Be c a us ePi l a t e spa i dl e s st ha nt hef a i rv a l ueoft hene ta s s e t s , t he ya r ec o ns i de r e dt oha v ema deab ar g ai n pur chase ,andwoul dt husr ec ordaGai nonBar gai nPur chasei nt heamountof$5, 000att het i meof a c qui s i t i on. Thef ol l owi ngj our nalent r ywoul dbepr epared: Cas h 20 0, 00 0 Ac c ount sr e c e i va bl e 18 5, 00 0 Copyr i ght s 40 0, 00 0 Pat e nt s 10 0, 00 0 Li abi l i t i e s 180, 000 Bar gai npur c has egai n 5, 000 Cas h 70 0, 00 0 Ob j e c t i v e :LO4 Di fficul t y:Moder at e


1 0 )P al iCo r po r a t i o ne x c h a ng e s2 0 0 , 0 0 0s h a r e so fne wl yi s s ue d$ 1 0pa rv a l uec o mmo ns t o c kwi t haf a i r ma r k e tv a l ueof$ 4 0pe rs h a r ef o ra l lt heout s t a ndi ng$ 5pa rv a l uec o mmo ns t o c ko fS h i ng l eI nc o r p or a t e d, whi c hc o nt i nue sona sal e ga le nt i t y .F ai rv a l uea ppr o x i ma t e dbookva l uef ora l la s s e t sa ndl i a bi l i t i e sof S hi ngl e .Pa l ipa i dt hef ol l o wi ngc o s t sa nde x pe ns e sr e l a t e dt ot hebus i ne s sc o mbi na t i on: Re gi s t e r i ngandi s s ui ngs e c ur i t i e s Ac c ount i ngandl e galf e e s S al a r i e sofPa l i ' se mpl o ye e swho s e t i mewasde di c a t e dt ot heme r ge r Cos tofc l os i ngdupl i c at ef ac i l i t i e s

19, 000 150, 000 86, 000 223, 000

Re qui r e d:Pr e pa r et hej our n ale nt r i e sr e l a t i ngt ot hea bo vea c qui s i t i onandpa yme nt si nc ur r e db yPa l i , a s s umi nga l lc o s t swe r epa i di nc a s h . Answer : I nve s t me nti nShi ngl e 8, 000, 000 CommonSt oc k 2, 000, 000 Addi t i onalPa i di nCa pi t al 6, 000, 000 Addi t i onalPai di nCa pi t al Cas h

19, 000

I nve s t me ntExpe ns e( f e e s ) Cas h

150, 000

Sal ar ye xpe ns e Cas h

19, 000

150, 000 86, 000 86, 000

Pl antc l os ur ee xpe ns e Cas h

223, 000 223, 000



1 1 )S a ma nt ha ' sS po r t i ngGoo dsha dne ta s s e t sc o ns i s t i ngo ft hef ol l o wi ng:

Cas h I nve nt or y Bui l di ngandFi xt ur e s Li abi l i t i e s

Bo okVa l ue 150, 000 820, 000 330, 000 ( 90, 000)

Fai rVa l ue 150 , 000 960 , 000 310 , 000 ( 88, 000)

Pedi cI ncor pora t edpur chase dSamant ha' sSport i ngGoods ,andi mmedi at el ydi s s ol vedSamant ha' sasa s e pa r at el e ga le nt i t y . Re q ui r e me nt1 :I fS a ma nt ha ' swa spur c h a s e df o r$ 1 , 0 0 0 , 0 0 0c a s h ,pr e pa r et hee nt r yr e c o r de db yP e di c . Re q ui r e me nt2 :I fS a ma nt ha ' swa spur c h a s e df o r$ 1 , 5 0 0 , 0 0 0c a s h ,pr e pa r et hee nt r yr e c o r de db yP e di c . Answer : Requi r ement1: Cas h* 15 0, 00 0 I nve nt or y 96 0, 00 0 Bui l di ngandFi xt ur e s 31 0, 00 0 Li abi l i t i e s 8 8, 0 00 Gai nonBa r gai nPur c has e 33 2, 0 00 Cas h* 1, 00 0, 0 00 * Ca s hent r i e sma yber e c o r de dne to ns i ngl el i nee nt r y . Requi r ement2: Cas h* 15 0, 00 0 I nve nt or y 96 0, 00 0 Bui l di ngandFi xt ur e s 31 0, 00 0 Goodwi l l 16 8, 00 0 Li abi l i t i e s 8 8, 0 00 Cas h* 1, 50 0, 0 00 * Ca s hent r i e sma yber e c o r de dne to ns i ngl el i nee nt r y . Ob j e c t i v e :LO4 Di fficul t y:Moder at e


1 2 )OnJ a nua r y2 ,2 0 1 0Ca r o l i naCl o t hi ngi s s ue d1 0 0 , 0 0 0ne ws h a r e so fi t s$ 5pa rv a l uec o mmo ns t o c k v a l ue da t$ 1 9as h a r ef o ra l lo fDa k ot aDr e s s i ngCo mpa n y' so ut s t a ndi ngc o mmo ns h a r e si na na c q ui s i t i o n. Ca r o l i napa i d$ 15 , 0 00f orr e gi s t e r i nga ndi s s ui ngs e c ur i t i e sand$ 1 0, 0 0 0f oro t h e rdi r e c tc o s t soft he bus i ne s sc ombi nat i on.Thef ai rval ueandbookval ueofDakot a ' si de nt i fiabl eas s e t sandl i abi l i t i e swe r et he s ame. As s umeDakot aCompanyi sdi s s ol vedont hedat eoft heac qui s i t i on.Summar i zedbal ances heet i nf or ma t i onf orbo t hc ompa ni e sj us tbe f or et hea c qui s i t i ononJ a nua r y2,2 0 10i sa sf ol l o ws :


Car ol i na $ 150, 000 320, 000 500, 000 350, 000 4, 000, 000 $5, 320, 000

Da kot a $ 120, 000 400, 000 500, 000 250, 000 1, 500, 000 $2, 770, 00


$1, 000, 000 1, 300, 000 2, 000, 000 1, 000, 000 20, 000 $5, 320, 000

$ 300, 000 660, 000 500, 000 100, 000 1, 210, 000 $2, 770, 000

Requi r ed: Pr e pa r eab a l a nc es he e tf o rCa r o l i naCl o t hi ngi mme di a t e l yaf t e rt heb us i ne s sc o mb i na t i o n. Answer : Ca r o l i naCl o t hi ng Bal anceSheet J anuar y2, 2010 As s e t s : Cas h I nve nt or y Ot he rc ur r e ntas s e t s Tot alc ur r e nta s s e t s

$245, 000 720, 000 1, 000, 000 1, 965, 000

Land Pl a nta s s e t s e t -n Goodwi l l T o t a lLo ng-t e r m As s e t s

600, 000 5, 500, 000 90, 000 6, 190, 000

Tot alas s e t s

$8, 155, 000

Li a bi l i t i e s : Ac c ount spa yabl e Not e spa yabl e Tot all i a bi l i t i e s

Equi t y: Co mmons t oc k( $5pa r ) Addi t i onalpai d-i n c api t al Re t ai ne de ar ni ngs Tot ale qui t y Tot all i a b. &e qui t y

$1, 300 , 000 1, 960 , 000 3, 260 , 000

2, 500 , 000 2, 385 , 000 10 , 000 4, 895 , 000 $8, 155 , 000

Ob j e c t i v e :LO4 Di fficul t y:Di fficul t


1 3 )Ba l a nc es he e ti nf o r ma t i o nf o rS phi nxCo mpa n ya tJ a nua r y1 ,2 0 1 1 ,i ss umma r i z e da sf o l l o ws : Cur r e ntas s e t s Pl antas s e t s

$230, 000 450, 000

Li abi l i t i e s $300, 000 Ca pi t als t oc k$10par 200, 000 Ret ai ne de ar ni ngs 180, 000 $680, 000

$680, 000

S phi nx ' sa s s e t sa ndl i a bi l i t i e sa r ef a i r l yva l ue de x c e ptf orpl a nta s s e t st ha ta r eunde r v al ue db y$ 5 0, 0 00 .On J anuar y2,2011 ,Pyr a mi dCor por at i oni s s ue s20 , 000s ha r e sofi t s$10parval uec ommons t oc kf oral lof S phi nx ' sne ta s s e t sa ndS phi nxi sdi s s o l v e d.Ma r ke tquo t a t i o nsf o rt het wos t o c kso nt hi sda t ea r e : Pyr ami dc ommon: Sphi nxc ommon:

$ 28. 0 0 $ 19. 5 0

Py r a mi dpa y st hef o l l o wi ngf e e sa n dc o s t si nc o nne c t i o nwi t ht hec o mb i na t i o n: Fi nde r ' sf e e Le gala ndac c ount i ngf e e s

$10, 000 6, 000

Requi r ed: 1. Cal cul at ePyrami d' si nvest mentc ostofSphi nxCorpor at i on. 2. Cal cul at eanygoodwi l lf r om t hebus i nes scombi nat i on. Answer : Requi r ement1 FMVofs haresi s s uedbyPyrami d:20, 000× $ 28 . 0 0= Requi r ement2 I nve s t me ntc os tf r om above : Le s s : Fa i rv al ueofSphi nx ' sne ta s s e t s( $ 68 0, 0 00of t o t a la s s e t spl us$ 5 0, 0 00ofunde r v al ue dpl a nta s s e t s mi nus$300, 000ofde bt ) Equal s :Goodwi l lf r om i nve s t me nti nSphi nx

$ 56 0, 0 00

$560, 000

430, 000 $130, 000



14)OnDec ember31, 2010, Peri sCompanyacqui r edShant aCompany' sout s t andi ngst ockbypayi ng $ 4 0 0 , 0 0 0c a s ha ndi s s ui ng1 0, 0 0 0s h a r e so fi t so wn$3 0pa rv a l uec o mmo ns t o c k ,whe nt hema r k e tpr i c e wa s$ 3 2pe rs ha r e . Pe r i spa i dl e g ala nda c c o unt i ngf e e sa mo unt i ngt o$ 3 5 , 0 0 0i na ddi t i ont os t o c ki s s ua nc e c o s t so f$ 8 , 0 0 0.Sha nt ai sdi s s ol v edont heda t eoft hea c qui s i t i on.Ba l a nc es he e ti nf or ma t i onf orP e r i sa nd S ha nt ai mme di a t e l ypr e c e di ngt hea c qui s i t i oni ss h ownbe l o w,i nc l udi ngf a i rv a l ue sf orS ha nt a ' sa s s e t s andl i abi l i t i e s .

Cas h Ac c ount sRe c e i vabl e I nve nt or y Land Pl antAs s e t s— Ne t Cons t r uc t i onPe r mi t s Ac c ount sPa yabl e Ot he rac c r ue de xpe ns e s Not e sPa yabl e CommonSt oc k( $30par ) CommonSt oc k( $20par ) Addi t i onalP . I . C Re t ai ne dEar ni ngs

Pe r i s BookVal ue 490, 000 560, 000 520, 000 460, 000 980, 000 380, 000 ( 460, 000) ( 160, 000) ( 800, 000) ( 960, 000)

Sha nt a BookVa l ue $140, 000 280, 000 200, 000 150, 000 325, 000 170, 000 ( 140, 000 ) ( 45, 000 ) ( 460, 000 )

Shant a Fai rVa l ue $140, 000 280, 000 260, 000 140, 000 355, 000 190, 000 ( 140 , 000 ) ( 45 , 000 ) ( 460 , 000 )

( 200, 000 ) ( 80, 000 ) ( 340, 000 )

( 192, 000) ( 818, 000)

Re q ui r e d:De t e r mi net hec o ns o l i da t e db al a nc e swhi c hPe r i swo ul dpr e s e nto nt he i rc o ns o l i da t e db al a nc e s he e tf ort hef ol l o wi nga c c ount s . Cas h I n v e n t o r y Co ns t r uc t i o nP e r mi t s Goodwi l l No t e sP a ya b l e CommonS t oc k Addi t i ona lPa i di nCa pi t a l Ret ai nedEar ni ngs Answer : Cas h= $ 49 0 , 0 0 0+ $ 14 0 , 0 0 0- $4 0 0 , 0 0 0- $ 3 5, 0 0 0- $ 8, 0 0 0= $ 1 87 , 0 0 0 I n v e n t o r y= $ 52 0 , 0 0 0+ $ 26 0 , 0 0 0= $ 7 80 , 0 00 Cons t r uc t i o nP er mi t s= $3 8 0 , 0 0 0+ $1 9 0 , 0 0 0= $ 57 0 , 0 0 Goodwi l l= $ 7 20 , 0 00( Pa i d$ 40 0, 0 00+ $ 3 20 , 0 00 )- $ 7 20 , 0 00( F ai rVa l ueofNe tAs s e t s )= 0 No t e sP a ya b l e= $8 0 0 , 0 0 0+ $4 6 0 , 0 0 0= $1 , 2 60 , 0 00 CommonSt oc k= $ 96 0 , 0 0 0+ $ 30 0, 0 00( 1 0 , 0 0 0s h ar e si s s ue d× $ 3 0pa r )= $1 , 2 60 , 0 00 Addi t i ona lPa i di nCa pi t a l= $ 19 2 , 0 0 0+ $ 20 , 0 00( 1 0 , 0 00s ha r e si s s ue d× $ 2e x c e s so ve rp arp e rs h ar e )$ 8, 0 00( c os tofi s s ua nc e )= $ 2 04 , 0 0 0 Re t a i ne dEa r n i ng s= $8 1 8 , 0 0 0- $ 3 5, 0 0 0( i n ve s t me nte x pe ns e )= $ 7 83 , 0 0 0 Ob j e c t i v e :LO4 Di fficul t y:Di fficul t


1 5 )OnJ une3 0 ,2 0 1 1,S t a mpo lCompa nyc e a s e dope r a t i onsa nda l loft he i ra s s e t sa ndl i a bi l i t i e swe r e pur c ha s e db yP os t ol iI nc o r po r a t e d. P os t o l ipa i d$ 4 0 , 0 0 0i nc a s ht ot heo wne ro fS t a mpol ,a nds i gne da five e a rno t epa y a bl et ot heo wne r so fS t a mpo li nt hea mo unto f$ 2 0 0, 0 0 0 .The i rc l o s i ngba l a nc es he e t sa s -y o fJ une3 0 ,2 0 1 1a r es ho wnb e l o w.I nt hepur c h a s ea gr e e me nt ,b ot hpa r t i e sn ot e dt ha tI n ve nt o r ywa s unde r v a l ue do nt heboo ksb y$ 1 0, 0 0 0,a ndPi s t ol iwo ul da l s ot a kepos s e s s i onofac us t o me rl i s twi t haf a i r va l ueof$ 18 , 0 00 .Pi s t ol ipa i da l ll e ga lc o s t soft heac qui s i t i on,whi c ha mount e dt o$ 7, 0 00 .

Cas h I nve nt or y Ot he rc ur r e ntas s e t s Land Pl a nta s s e t s e t -n Tot alAs s e t s

Pos t ol i $150, 000 260, 000 420, 000 60, 000 590, 000 $1, 480, 000

St ampol $1 7, 0 00 12 0, 0 00 6 0, 0 00 0 19 0, 0 00 $38 7, 0 00


$440, 000 160, 000 20, 000 60, 000 800, 000 $1, 480, 000

$12 7, 0 00 8 0, 0 00 5 0, 0 00 0 13 0, 0 00 $38 7, 0 00

Requi r ed: 1 .Pr e pa r et hej our n ale nt r yPos t ol iwoul dr e c o r da tt heda t eofa c qui s i t i on. 2 .Pr e pa r et hej o ur n a le nt r yS t a mpo lwoul dr e c o r da tt heda t eofa c q ui s i t i o n. Answer : Pos t ol i ' sj our na le nt r y: I nve nt or y Ot he rCur r e ntAs s e t s Pl antAs s e t s— ne t Cus t ome rLi s t Goodwi l l Cas h* Ac c ount sPa ya bl e Not e sPa ya bl e * * I nve s t me ntExpe ns e Cas h

130, 000 60, 000 190, 000 18, 000 32, 000 23, 000 127, 000 280, 000 7, 000 7, 000

* Ca s hpa y me ntof$ 4 0 , 0 0 0i ss ho wnne to ft he$ 1 7 , 0 0 0r e c e i v e di nt hea c qui s i t i o n. * * No t e sP a ya bl es i gne df or$ 2 0 0 , 0 0 0i ss ho wni na ddi t i o nt ot he$ 80 , 0 0 0pur c ha s e di nt hea c qui s i t i o n.


S t a mpol ' sj our n ale nt r y : Ac c ount sPa yabl e Not e sPa yabl e Capi t alSt oc k Re t ai ne dEar ni ngs Cas h I nve nt or y Ot he rCur r e ntAs s e t s Pl antas s e t s— ne t

$127, 000 80, 000 50, 000 130, 000 $17, 000 120, 000 60, 000 190, 000


1 6 )P o nya c q ui r e dS purCor p or a t i on' sa s s e t sa ndl i a bi l i t i e sf o r$ 5 00 , 0 0 0c a s honDe c e mbe r3 1 ,2 0 10 .S pur di s s ol v edont heda t eoft hea c qui s i t i on.S pur ' sb al a nc es h ee ta ndr e l a t e df a i rv a l ue sa r es ho wna so ft ha t da t e ,be l o w.

Cas h Ac c ount sRe c e i vabl e Land Pl antandEqui pme nt— ne t Fr a nc hi s eAgr e e me nt Tot alAs s e t s Ac c ount sPa yabl e Ot he rLi abi l i t i e s CommonSt oc k Addi t i onalPai di nCa pi t al Re t ai ne dEar ni ngs Tot alLi abi l i t i esandEqui t y

Bo okVa l ue $2 0, 00 0 4 0, 00 0 4 5, 00 0 46 0, 00 0 0 $56 5, 00 0

Fai rVa l ue $20, 000 38, 000 50, 000 410, 000 160, 000

$7 0, 00 0 12 0, 00 0 18 0, 00 0 4 0, 00 0 15 5, 00 0 $565, 000

$70, 000 110, 000

Re qui r e d:Pr e pa r et hej our n ale nt r yr e c or de db yPonyasar e s ul toft hi st r a ns a c t i on. Answer : Ac c ount sRe c e i vabl e 38, 000 Land 50, 000 Pl antandEqui pme nt— ne t 410, 000 Fr a nc hi s eagr e e me nt 160, 000 Goodwi l l 2, 000 Ac c ount sPa yabl e 70, 000 Ot he rLi abi l i t i e s 110, 000 Cas h* 480, 000 * Ca s hpa y me nti ss ho wnne to fc a s hr e c e i v e di na c q ui s i t i o n. Ob j e c t i v e :LO4 Di fficul t y:Moder at e


220951999 Test Bank for Advanced Accounting 11th Edition by Beams

Recommend Documents