Question
4 (12 points) What is a Stock Acquisition? (include in your explanation how the initial entry...
4 (12 points) What is a Stock Acquisition? (include in your explanation how the initial entry to record a stock acquisition differs from the initial entry to record an asset acquisition) (4 points) On January 2, 2018, Memphis Metal Manufacturing Company paid $18 million for Maine Marine Metals Company in a transaction properly accounted for as an asset acquisition. The book values and fair values of Maine Marine Metals Company's net assets on January 2, 2018 were as follows: 5. Book Value Fair Value $ 160,000 $1,800,000 1,650,000 s 4,750,000 3,425,000 $ 12,895,000 $ 2,650,000 $ 3,475,000s 3,475,000 $1,500,000 160,000 Cash Accounts Receivable Inventory PP&E Accounts Payable Mortgage Payable Federal Environmental Liability 9,562,000 2,400,000 Note: Unless noted otherwise, assume the existing cash account balance is included in the purchased assets Required: Complete the journal entry to record the asset acquisition. Quiz continues on page 2
Answers
Memphis Metal Manufacturing Company Journal entries for asset purchase Date Account tittle Debit $ Credit $ 2018 2-Jan Cash 160,000 Accounts Receivable 1,650,000 Inventory 3,425,000 PP&E 12,895,000 Cash 18,000,000 Initial Negative Goodwill 130,000 ( To record purchase of assets at fair value. Consideration paid is less than the fair value of assets acquired, then the difference is transferred to Negative goodwill account)
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