Advanced Financial Accounting 12th Edition by Theodore Christensen solution manual

 

 
 
 

Fair value of compensation given
$480,000 
 

Fair value of net identifiable assets
($490,000 - $85,000)
 (405,000)
 

Goodwill
$  75,000 
 

 
Computation of APIC
 
Fair value of compensation given ($60 x 8,000 shares)
Less par value of shares issued ($8 x 8,000)
$480,000
(64,000)

Plus existing APIC from Pam’s books
 140,000

Additional Paid-In Capital
$  556,000

E1-22  Recording a Business Combination
 
 
Merger Expense
54,000 
 

 
Deferred Stock Issue Costs
29,000 
 

 
     Cash
 
83,000 

 
 
 
 

 
Cash
70,000 
 

 
Accounts Receivable
110,000 
 

 
Inventory
200,000 
 

 
Land
100,000 
 

 
Buildings and Equipment
350,000 
 

 
Goodwill (1)
30,000 
 

 
     Accounts Payable
 
195,000 

 
     Bonds Payable
 
100,000 

 
     Bond Premium
 
5,000 

 
     Common Stock
 
320,000 

 
     Additional Paid-In Capital (2)
 
211,000 

 
     Deferred Stock Issue Costs
 
29,000 

 
    Computation of goodwill
 
 
Fair value of consideration given (40,000 x $14)
$560,000 

 
Fair value of assets acquired
$830,000 
 
 

 
Fair value of liabilities assumed
(300,000)
 
 

 
Fair value of net assets acquired
 (530,000)

 
Goodwill
$  30,000 

 
 
    Computation of additional paid-in capital
 
 
Number of shares issued
40,000 

 
Issue price in excess of par value ($14 - $8)
x       $6 

 
Total
$240,000 

 
Less: Deferred stock issue costs
   (29,000)

 
Increase in additional paid-in capital
$211,000 

 
 
E1-23  Reporting Income
 
 
 
 

20X2:
Net income
=
$6,028,000 [$2,500,000 + $3,528,000]

 
Earnings per share
=
$5.48 [$6,028,000 / (1,000,000 + 100,000*)]

 
 
 
 

20X1:
Net income
=
$4,460,000 [previously reported]

 
Earnings per share
=
$4.46 [$4,460,000 / 1,000,000]

 
 
 
 

 
* 100,000 = 200,000 shares x ½ year

SOLUTIONS TO PROBLEMS
 
P1-24  Assets and Accounts Payable Transferred to Subsidiary
 
    a. Journal entry recorded by Pab Corporation for its transfer of
        assets and accounts payable to Sollon Company:
 
 
Investment in Sollon Company Common Stock
320,000
 

 
Accounts Payable
45,000
 

 
Accumulated Depreciation – Buildings
40,000
 

 
Accumulated Depreciation – Equipment
10,000
 

 
     Cash
 
25,000

 
     Inventory
 
70,000

 
     Land
 
60,000

 
     Buildings
 
170,000

 
     Equipment
 
90,000

 
 
    b. Journal entry recorded by Sollon Company for receipt of assets
        and accounts payable from Pab Corporation:
 
 
Cash
25,000
 

 
Inventory
70,000
 

 
Land
60,000