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Born Corporation agrees to acquire the net assets of Wren Corporation on January 1, 2015. Wren has the following balance sheet on the date of acquisition: An appraiser determines that in-process R&D exists and has an estimated value of $20,000. The appraisal indicates that the following assets have fair values that differ from their book values: Use value analysis to prepare the entry on the books of Born Corporation to acquire the net assets of Wren Corporation under each of the following purchase price scenarios: 1. Purchase price is $540,000. 2. Purchase price is $350,000.
Expert Answer
| Answer no-1 | ||
| Calculation of Net Asstes Wern Corp | ||
| Assests | Amount $ | |
| Accounts Receivable | $ 79,000 | |
| Inventory | $ 98,000 | |
| Other Current Assets | $ 55,000 | |
| Equipment | $ 340,000 | |
| Trademark | $ 30,000 | |
| Total Assets | $ 602,000 | |
| Liabilities | ||
| Current Liabilities | $ 125,000 | |
| Bond payable | $ 100,000 | |
| Total Liabilities | $ 225,000 | |
| Net Assets | $ 377,000 | |
| Process R & D | $ 20,000 | |
| Total Value | $ 397,000 | |
| Purchase Value | $ 540,000 | |
| Good Will | $ 143,000 | |
| Entries | ||
| Dr | Cr | |
| Accounts Receivable | $ 79,000 | |
| Inventory | $ 98,000 | |
| Other Current Assets | $ 55,000 | |
| Equipment | $ 340,000 | |
| Trademark | $ 30,000 | |
| Process R & D | $ 20,000 | |
| Good will | $ 143,000 | |
| Current Liabilities | $ 125,000 | |
| Bond payable | $ 100,000 | |
| Business Purchase A/C | $ 540,000 | |
| Answer -2 | ||
| Calculation of Net Asstes Wern Corp | ||
| Assests | Amount $ | |
| Accounts Receivable | $ 79,000 | |
| Inventory | $ 98,000 | |
| Other Current Assets | $ 55,000 | |
| Equipment | $ 340,000 | |
| Trademark | $ 30,000 | |
| Total Assets | $ 602,000 | |
| Liabilities | ||
| Current Liabilities | $ 125,000 | |
| Bond payable | $ 100,000 | |
| Total Liabilities | $ 225,000 | |
| Net Assets | $ 377,000 | |
| Process R & D | $ 20,000 | |
| Total Value | $ 397,000 | |
| Purchase Value | $ 350,000 | |
| Cost of Control | $ (47,000) | |
| Entries | ||
| Dr | Cr | |
| Accounts Receivable | $ 79,000 | |
| Inventory | $ 98,000 | |
| Other Current Assets | $ 55,000 | |
| Equipment | $ 340,000 | |
| Trademark | $ 30,000 | |
| Process R & D | $ 20,000 | |
| Cost of Control | $ 47,000 | |
| Current Liabilities | $ 125,000 | |
| Bond payable | $ 100,000 | |
| Business Purchase A/C | $ 350,000 | |
