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1. Pizza purchased 100% of the net assets of Submarine

Question : 1. Pizza purchased 100% of the net assets of Submarine : 3598

1. Pizza purchased 100% of the net assets of Submarine Company in an “Asset Acquisition.” Pizza paid $5 million for Submarine Company. Submarine Company had identifiable net assets of $3.5 million.

The difference of $1.5 million will be accounting for as:

A. Ordinary Gain

B. Bargain Purchase

C. Goodwill

D. Other Assets

2. The following is the list of assets and liabilities of Submarine Company

Book Value Fair Value

Account Receivable                         1,400,000                   1,350,000

Inventory                                              500,000                     600,000

Plant and Equipment                        750,000                      1,900,000

Accounts Payable                              100,000                     150,000

Mortgage Payable                               200,000                    200,000

2,350,000                    3,500,000

Complete the journal entry to record the asset acquisition

Debit                           Credit

3 If Pizza Co. had instead purchased Submarine through a “Stock Acquisition” (purchased 100% of Submarine Stock) the journal entry to record the stock acquisition would be as follows:

                                                           Stock Acquisition                          Debit                    Credit

Investment subsidiary                 5,000,000

                                                                                   Cash                                                    5,000,000

A.True

B. False

4. (Stock Acquisition) The current method of accounting for a stock acquisition is more aligned with Parent Company Concept versus the Economic Unit Concept.

A. True

B. False

5. (Stock Acquisition) Noncontrolling interest represents the equity position of the subsidiary shareholders who continue to hold stock (did not sell their ownership) in the subsidiary.

A. True

B. False

Solution
5 (1 Ratings )

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Accounting 1 Year Ago 236 Views
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