Advanced Accounting

May 14th, 2013
RockCafe
Category:
Business & Finance
Price: $10 USD

Question description

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:




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:



  1. Determine and provide the proper accounting entry to record the subsidiary
    on Paul’s books on January 1, 2009 as if Ernie was dissolved.

  2. Determine and provide the proper accounting entry to record the subsidiary
    on Ernie’s books on January 1, 2009 as if Ernie was dissolved.

  3. 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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