Question & Answer: Easton Corporation purchased 100% of the common stock of Hopkins Inc. on January 2, 2017. Hopkins’ balance sheet on January 2, 2017 was as fol…..

Easton Corporation purchased 100% of the common stock of Hopkins Inc. on January 2, 2017. Hopkins’ balance sheet on January 2, 2017 was as follows: Accounts receivable-net $ 250,000 Current liabilities $ 80,000 Inventory 340,000 Long term debt 170,000 Land 140,000 Common stock ($1 par) 50,000 Building-net 120,000 Paid-in capital 450,000 Equipment-net 90,000 Retained earnings 190,000 Total Assets $940,000 Total Liabilities & Equity $940,000 Fair values agree with book values except for inventory, land, and equipment that have fair values of $390,000, $150,000 and $75,000, respectively. Hopkins has unrecorded patent rights valued at $30,000. Required: Prepare a schedule to assign values to Hopkins’ post-acquisition assets and liabilities assuming Easton paid $780,000 cash for the acquisition. Prepare the consolidation entries for a January 2, 2017 consolidated balance sheet.

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Question & Answer: Easton Corporation purchased 100% of the common stock of Hopkins Inc. on January 2, 2017. Hopkins’ balance sheet on January 2, 2017 was as fol…..
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Journal Entries
At the time of making the investment
Date Account Debit Credit
January,2 2017 Investment in Hopkins Inc. 780000
Cash 780000
For consolidation
Date Account Debit Credit
January,2 2017 Accounts receivable 250000
Inveontory 390000
Land 190000
Buildings, net 120000
Equipment , net 75000
Goodwill 5000
Current liabilities 80000
Long term debt 170000
Investment in Hopkins Inc. 780000

the workings are shown below.

Hopkins Inc.
Assets and liabilities as on January2, 2017
Details Book value Fair value
Assets
Accounts receivable 250000 250000
Inveontory 340000 390000
Land 140000 190000
Buildings, net 120000 120000
Equipment , net 90000 75000
940000 1025000
Current liabilities 80000 80000
Long term debt 170000 170000
Net assets acquired
Assets:
Accounts receivable 250000
Inveontory 390000
Land 190000
Buildings, net 120000
Equipment , net 75000 1025000
Liabilities
Current liabilities 80000
Long term debt 170000 250000
Net assets acquired 775000
Cash paid for acquisition 780000
Goodwill 5000

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