Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. accounting
  3. liberty inc. acquired 100% of the voting common st

Liberty Inc. acquired 100% of the voting common stock of Valance Inc. on January 1, 2018...

Free

50.1K

Verified Solution

Question

Accounting

Liberty Inc. acquired 100% of the voting common stock of ValanceInc. on January 1, 2018 by issuing 4,000 shares of Liberty Inc. $40par value common stock that had a fair value of $120 per share.Valance Inc. will dissolve after the acquisition.Liberty incurred $40,000 of legal and accounting fees; and paid$25,000 in stock issuance costs as a result of this acquisition.The book value and fair value of Valance’s accounts on that date(prior to creating the combination) along with the book value ofPace's accounts are shown below:


           

Liberty

Valance

Valance

Book

Book

Fair

Value

Value

Value

Retained earnings, 1/1/18

$(250,000)

$(240,000)

Cash

Receivables

100,000

    70,000

    20,000

    50,000

$20,000

50,000

Inventory

230,000

170,000

210,000

Land

280,000

220,000

240,000

Buildings (net)

480,000

240,000

270,000

Equipment (net)

120,000

    90,000

90,000

Liabilities

(650,000)

(430,000)

(420,000)

Common stock

(360,000)

    (80,000)

Additional paid-in capital

    (20,000)

    (40,000)

Answer & Explanation Solved by verified expert
4.4 Ratings (749 Votes)

Fair value of net assets
Cash $              20,000
Receivables $              50,000
Inventory $            210,000
Land $            240,000
Buildings $            270,000
Equipment $              90,000
Total fair value of assets $            880,000
Less: Liabilities $            420,000
Fair value of net assets $            460,000
Paid in capital (4000*120) $            480,000
Less: Fair value of net assets $         (460,000)
Add: legal and accounting fees $              40,000
Add: stock issuance costs $              25,000
Value of goodwill $              85,000
Cash paid for legal and accounting fees $              40,000
Cash paid for stock issuance costs $              25,000
Total cash paid $              65,000
Less: cash received $              20,000
Net cash paid (credited) $              45,000
Date Account title and explanation Debit Credit
January 1, 2018 Receivables $          50,000
Inventory $        210,000
Land $        240,000
Buildings $        270,000
Equipment $          90,000
Goodwill $          85,000
             Liabilities $        420,000
             Common stock (4000*40) $        160,000
             Additional paid-in capital (4000*(120-40)) $        320,000
             Cash $          45,000
To record the acquisition of Valance Inc.

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students

Q

A combined cycle power system uses a simple gas-turbine Brayton cycle in conjunction with a simple...

Mechanical Engineering
Q

please provide an example of a wheatstone bridge circuit in a HALF brindge as well as...

Electrical Engineering
Q

sources you use to your list 4 Which animal species did you choose Where does...

Biology
Q

xplain the absorption process in LASER Derive the mathematical expression for Einstein s Co efficient...

Physics
Q

9 A hole is drilled in a copper sheet The diameter of the hole is...

Physics
Q

8 Commercially available antiserum samples containing antibodies for antigens A B and D are used...

Basic Math
Q

QUESTION 5 A point is given on the terminal side of an angle drawn in...

Basic Math
Q

Documentation of Planning Cycle Number of Children: Date of Implementation: PART 1 Collect information...

Accounting
Q

Which of the following statements is true for an invoice that...

Accounting
Q

Discuss how a time driven ABC cost system can be implemented in PepsiCo and the...

Accounting
Q

Alice and Mark had $3,000 in domestic adoption expenses in 2019, $2,000 in adoption expenses...

Accounting
Q

Nike has 700,000 authorized shares of $2 par value common stock. The company issued 450,000...

Accounting