Cash purchase, several of each priority, with goodwill. Tweedy Corporation is contemplating the purchase of the net assets of Sylvester Corporation in anticipation of expanding its operations. The balance sheet of Sylvester Corporation on December 31, 20X1, is as follows:
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Sylvester Corporation |
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Current assets: |
Current liabilities: |
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|
Notes receivable |
$24,000 |
Accounts payable |
$45,000 |
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|
Accounts receivable |
56,000 |
Payroll and benefit related |
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|
Inventory |
31,000 |
liabilities |
12,500 |
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|
Other current assets |
18,000 |
Debt maturing in one year |
10,000 |
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|
Total current assets |
$129,000 |
Total current liabilities |
$67,500 |
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|
Investments |
65,000 |
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Fixed assets: |
Other liabilities: |
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|
Land |
$32,000 |
Long term debt |
$248,000 |
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|
Building |
245,000 |
Payroll and benefit related |
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|
Equipment |
387,000 |
liabilities |
156,000 |
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|
Total fixed assets |
664,000 |
Total other liabilities |
404,000 |
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|
Intangibles: |
Stockholders’ equity: |
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|
Goodwill |
$45,000 |
Common stock |
$100,000 |
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|
Patents |
23,000 |
Paid in capital in excess of par |
250,000 |
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|
Trade names |
10,000 |
Retained earnings |
114,500 |
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|
Total intangibles |
78,000 |
Total equity |
464,500 |
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|
Total assets |
$936,000 |
Total liabilities and equity |
$936,000 |
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An appraiser for Tweedy determined the fair values of the assets and liabilities to be as follows:
|
Assets |
Liabilities |
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|
Notes receivable |
$24,000 |
Accounts payable |
$45,000 |
|
Accounts receivable |
56,000 |
Payroll and benefit related |
|
|
Inventory |
30,000 |
liabilities |
12,500 |
|
Other current assets |
15,000 |
Debt maturing in one year |
10,000 |
|
Investments |
63,000 |
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|
Land |
55,000 |
Long term debt |
248,000 |
|
Building |
275,000 |
Payroll and benefit related |
|
|
Equipment |
426,000 |
liabilities—long term |
156,000 |
|
Goodwill |
— |
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|
Patents |
20,000 |
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|
Trade names |
15,000 |
The agreed upon purchase price was $580,000 in cash. Direct acquisition costs paid in cash totaled $20,000.
Required
Using the above information, do zone analysis, and prepare the entry on the books of Tweedy Corporation to purchase the net assets of Sylvester Corporation on December 31, 20X1.