week 1
knohe_
problem_1-6.docxProblem 1-6 (LO 3, 4) Cash purchase with goodwill.
Tweeden Corporation is contemplating the acquisition of the net assets of Sylvester Corporation in anticipation of expanding its operations. The balance sheet of Sylvester Corporation on December 31, 2015, is as follows:
Sylvester Corporation
Balance Sheet
December 31, 2015
Current assets:
Current liabilities:
Notes receivable
$ 24,000
Accounts payable
$ 45,000
Accounts receivable
56,000
Payroll and benefit-related liabilities
12,500
Inventory
31,000
Other current assets
18,000
Debt maturing in one year
10,000
Total current assets
$129,000
Total current liabilities
$ 67,500
Investments
65,000
Fixed assets:
Other liabilities:
Land
$ 32,000
Long-term debt
$248,000
Building
245,000
Payroll and benefit-related liabilities
156,000
Equipment
387,000
Total fixed assets
664,000
Total other liabilities
404,000
Intangibles:
Stockholders’ equity:
Goodwill
$ 45,000
Common stock
$100,000
Patents
23,000
Paid-in capital in excess of par
250,000
Trade names
10,000
Retained earnings
114,500
Total intangibles
78,000
Total equity
464,500
Total assets
$936,000
Total liabilities and equity
$936,000
An appraiser for Tweeden determined the fair values of Sylvester’s assets and liabilities to be as shown on next page.
Assets
Liabilities
Notes receivable
$ 24,000
Accounts payable
$ 45,000
Accounts receivable
56,000
Payroll and benefit-related liabilities—current
12,500
Inventory
30,000
Other current assets
15,000
Debt maturing in one year
10,000
Investments
63,000
Land
55,000
Long-term debt
248,000
Building
275,000
Payroll and benefit-related liabilities—long-term
156,000
Equipment
426,000
Goodwill
—
Patents
20,000
Trade names
15,000
The agreed-upon purchase price is $580,000 in cash. Acquisition costs paid in cash total $20,000.
Required
