Step-by-step solution file
Pan acquires Hindenburger, a fast-food restaurant. Their assets
Pan acquires Hindenburger, a fast-food restaurant. Their assets consist of cash
($40,000), Accounts Receivable ($100,000), and Inventory ($50,000). Their liabilities consist
of Accounts Payable ($50,000) and a long term loan ($40,000). Their shareholders? equity
consists of common stock ($40,000) and retained earnings ($60,000).
Pita Pan paid $110,000 to acquire Hindenburger due to their extensive customer base.
a. Calculate the amount of goodwill on this transaction.
40,000 + 100,000 + 50,000 - 50,000 - 40,000 = 100,000
110,000 - 100,000 = 10,000
b. Prepare the journal entry for the acquisition.
DR. Cash 40,000
DR. Accounts receivable 100,000
DR. Inventory 50,000
DR. Goodwill 10,000
CR. Accounts payable
This question was answered on: Feb 21, 2020
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