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[solution] » Pan acquires Hindenburger, a fast-food restaurant. Their assets

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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


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