Question

On July 1, 2020, Ayayai Corporation purchased Young Company by paying $257,800 cash and issuing a $139,000 note payable to Steve Young. At July 1, 2020, the balance sheet of Young Company was as follows.

Cash $51,600
Accounts payable $207,000
Accounts receivable 89,700
Stockholders’ equity 238,700
Inventory 106,000
Land 40,600
Buildings (net) 75,600
Equipment (net) 71,000
Trademarks 11,200

The recorded amounts all approximate current values except for land (fair value of $64,500), inventory (fair value of $125,100), and trademarks (fair value of $15,120).

Prepare the July 1 entry for Ayayai Corporation to record the purchase.

Answer 1

Answer:

Cash $51,600

Accounts receivable $89,700

Inventory $125,100

Land $64,500

Buildings (net) 75,600

Equipment (net) 71,000

Trademarks $15,120

Goodwill $111,180 (Balancing figure)

      To Accounts payable $207,000

      To Note payable $139,000

      To Cash $257,800

(Being the purchase is recorded)

Explanation:

The journal entry is shown below:

Cash $51,600

Accounts receivable $89,700

Inventory $125,100

Land $64,500

Buildings (net) 75,600

Equipment (net) 71,000

Trademarks $15,120

Goodwill $111,180 (Balancing figure)

      To Accounts payable $207,000

      To Note payable $139,000

      To Cash $257,800

(Being the purchase is recorded)

For recording this we debited the assets as it increased the assets and credited the current liabilities as it increased the current liabilities

Plus the balancing figure is debited to goodwill