Advanced Financial Accounting
12th Edition
ISBN: 9781259916977
Author: Christensen, Theodore E., COTTRELL, David M., Budd, Cassy
Publisher: Mcgraw-hill Education,
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Textbook Question
Chapter 1, Problem 1.36P
Business Combination
Following are the balance sheets of Power Boogie Musical Corporation and Shoot-Toot TubaCompany as of December 31, 20X5.
In preparation for a possible business combination, a team of experts from Power BoogieMusical made a thorough examination and audit of Shoot-Toot Tuba. They found that Shoot-Toot’s assets and liabilities were correctly stated except that they estimated uncollectibleaccounts at $1,400. The experts also estimated the market value of the inventory at $35,000and the market value of the plant and equipment at $500,000. The business combination tookplace on January 1, 20X6, and on that date Power Boogie’s Musical acquired all the assets andliabilities of Shoot-Toot Tuba. On that date, Power Boogie’s common stock was selling for$55 per share.
Required
Record the combination on Power Boogie’s books assuming that Power Boogie issued 9,000 of its
$10 par common shares in exchange for Shoot-Toot’s assets and liabilities.
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The following balance sheet summary, together with residual profit-sharing ratios, was developed on April 1, 2011, when the Dazzle, Enigma, and Faceless partnership began its liquidation:
Cash
P140,000
Liabilities
P 60,000
Accounts receivable
60,000
Loan from Enigma
20,000
Inventories
85,000
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P510,000
P510,000
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Chapter 1 Solutions
Advanced Financial Accounting
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