Acc407 Advanced Accounting: Week 2 Assignment (P1-37 and P3-31)

Acc407 Advanced Accounting
Week 2 Assignment

P1-37 Journal Entries
On January 1, 20X3, PURE Products Corporation issued 12,000 hares of its $10 par value stock to acquire the net assets of Light Steel Company. Underlying book value and fair value information for the balance sheet items of Light Steel at the time of acquisition follow:
Balance Sheet Book Value Fair Value
Cash $60,000 $60,000
Accounts Receivable 100,000 100,000
Inventory (LIFO basis) 60,000 115,000
Land 50,000 70,000
Buildings and Equipment 400,000 350,000
Less: Accumulated Depreciation (150,000) -----
Total Assets $520,000 $695,000

Accounts Payable $10,000 $10,000
Bonds Payable 200,000 180,000
Common Stock ($5 par value) 150,000
Additional Paid-In Capital 70,000
Retained Earnings 90,000
Total Liabilities and Equities $520,000

Light Steel shares were selling at $18 and PURE Products shares were selling at $50 just before the merger announcement. Additional cash payments made by
PURE Products in completing the acquisition were
Finder's fee paid to firm that located Light Steel $10,000
Audit fee for stock issued by PURE Products 3,000
Stock registration fee for new shares of PURE Products 5,000
Legal fees paid to assist in transfer of net assets 9,000
Cost of SEC registration of PURE Products shares 1,000

Prepare all journal entries to record the business combination on PURE Products' books.

P3-31 Parent Company and Consolidated Balances
Exacto Company reported the following net income and dividends for the years indicated:
Year Net Income Dividends
20X5 $35,000 $12,000
20X6 45,000 20,000
20X7 30,000 14,000
True Corporation acquired 75 percent of Excato's common stock on January 1, 20X5. On that date, the fair value of Exacto's net assets was equal to the book value. True users rhe equity method in accounting for its ownership in Excato and reported a balance of $259,800 in its investment account on December 31, 20X7.

a. What amount did True pay when it purchased Exacto's shares?
b. What was the fair value of Exacto's net assets on January 1, 20X5?
c. What amount was assigned to the NCI shareholders on January 1, 20X5?
d. What amount will be assigned to the NCI shareholders in the consolidated balance sheet prepared at December 31, 20X7?
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