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Question;2.;On January 1, 20X5, Brown Inc. acquired Larson;Company's net assets in exchange for Brown?s common stock with a par value of;$100,000 and a fair value of $800,000. Brown also paid $10,000 in direct;acquisition costs and $15,000 in stock issuance costs.;On;this date, Larson?s condensed account balances showed the following;Current Assets;Book;Value;Fair;Value;$ 280,000;$ 370,000;Plant;and Equipment;440,000;480,000;Accumulated;Depreciation;(100,000);120,000;Intangibles;- Patents;80,000;Current;Liabilities;(140,000);(140,000);Long-Term;Debt;(100,000);(110,000);Common;Stock;(200,000);Other;Paid-in Capital;(120,000);Retained Earnings;(140,000);Required;Record;Brown?s purchase of Larson Company?s net assets on the books of Brown Inc.;1-9;Chapter 1...............;3.;The Chan Corporation purchased the net assets;(existing liabilities were assumed) of the Don Company for $900,000 cash. The;balance sheet for the Don Company on the date of acquisition showed the;following;Assets;Current assets........................................;$;100,000;Equipment.............................................;300,000;Accumulated;depreciation..............................;(100,000);Plant.................................................;600,000;Accumulated;depreciation..............................;(250,000);Total.................................................;$ 650,000;=========;Liabilities;and Equity;Bonds payable, 8%.....................................;$;200,000;Common stock, $1;par..................................;100,000;Paid-in capital in excess of;par......................;200,000;Retained earnings.....................................;150,000.................................................Total;$ 650,000;=========;1-10;Chapter 1;Required;The;equipment has a fair value of $300,000, and the plant assets have a fair value;of $500,000. Assume that the Chan Corporation has an effective tax rate of 40%.;Prepare the entry to record the purchase of the Don Company for each of the;following separate cases with specific added information;a.;The sale is a nontaxable exchange to the seller that;limits the buyer to depreciation and amortization on only book value for tax;purposes.;b.;The bonds have a current fair value of $190,000. The;transaction is a nontaxable exchange.;c.;There are $100,000 of prior-year losses that can be;used to claim a tax refund. The transaction is a nontaxable exchange.;d.;There are $150,000 of past losses that can be;carried forward to future years to offset taxes that will be due. The;transaction is a nontaxable exchange.;4.;On January 1, 20X5, Zebb and Nottle Companies had;condensed balance sheets as shown below:.................................................;Zebb;Nottle;Current Assets;Company;Company;$1,000,000;$;600,000;Plant and;Equipment......................;1,500,000;800,000;$2,500,000;$1,400,000;Current Liabilities;==========;==========;$ 200,000;$;100,000;Long-Term;Debt...........................;300,000;300,000;Common;Stock, $10 par.....................;1,400,000;400,000;Paid-in;Capital in Excess of Par..........;0;100,000;Retained;Earnings.........................;600,000;500,000;$2,500,000;$1,400,000;==========;==========;Required;Record the;acquisition of Nottle?s net assets, the issuance of the stock and/or payment of;cash, and payment of the related costs. Assume that Zebb issued 30,000 shares;of new common stock with a fair value of $25 per share and paid $500,000 cash;for all of the net assets of Nottle. Direct acquisition costs of $50,000 and stock;issuance costs of $20,000 were paid-in cash. The combination is accounted for;as a purchase. Current assets had a fair value of $650,000, plant and equipment;had a fair value of $900,000, and long-term debt had a fair value of $330,000.

 

Paper#44345 | Written in 18-Jul-2015

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