Advanced Accounting
Paul, Inc. acquired 100% of Ernie’s Inc. net assets on January 1, 2009 for
$300,000 in cash and paid 10,000 for acquisition cost. The following facts
relate to the acquisitions:
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Accounts Receivable |
50,000 |
|
Inventory |
80,000 |
|
Equipment, Net |
50,000 |
|
Land and Building, Net |
120,000 |
|
Total Assets |
$300,000 |
|
Bonds Payable |
90,000 |
|
Common stock |
100,000 |
|
Retained earnings |
110,000 |
|
Total Liabilities and Stockholders’ Equity |
$300,000 |
|
Fair value of acquired net assets: |
|
|
Accounts receivable |
$50,000 |
|
Inventory |
100,000 |
|
Equipment |
30,000 |
|
Land and building |
180,000 |
|
Customer list |
30,000 |
|
Bonds payable |
100,000 |
In 3–5 pages, complete the following:
- Determine and provide the proper accounting entry to record the subsidiary
on Paul’s books on January 1, 2009 as if Ernie was dissolved. - Determine and provide the proper accounting entry to record the subsidiary
on Ernie’s books on January 1, 2009 as if Ernie was dissolved. - While acquisitions are often friendly, there are numerous occasions when a
party does not want to be acquired. Discuss possible defensive strategies that
firms can implement to fend off a hostile takeover attempt.
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