Accounting for Negative Goodwill
Refer to Practice 10 14. Assume that the cash acquisition price is $500,000 instead of $1,000,000. Make the journal entry necessary on the books of James Company to record the acquisition.
Practice 10 14
Accounting for the Acquisition of an Entire Company
James Company purchased Thomas Manufacturing for $1,000,000 cash on January 1.The book value and fair value of the assets of Thomas as of the date of the acquisition follow:
|
|
Book |
Fair |
|
|
Value |
Value |
|
Cash |
$ 10,000 |
$ 10,000 |
|
Accounts receivable |
100,000 |
100,000 |
|
Inventory |
200,000 |
300,000 |
|
Patent |
0 |
50,000 |
|
Property, plant, and equipment |
400,000 |
600,000 |
|
Totals |
$710,000 |
$1,060,000 |
In addition, Thomas had liabilities totaling $400,000 at the time of the acquisition. Thomas has no other separately identifiable intangible assets. Make the journal entry necessary on the books of James Company to record the acquisition.