Breaking Infomation
Loading...

Comprehensive Business Combination Problem | P1-43 |

12:07 AM

P1-43 Comprehensive Business Combination Problem

Bigtime Industries Inc, enterd into a business combinatiom agreement with Hydrolized Chemical
Corporation (HCC) to ensure an uninterrupted supply of key raw materials and to realize certain economies from combining the operating processes and the marketing efforts of the two companies. Under the terms of the agreement, Bigtime issued 180,000 shares of its $1 par common stock in exchange for all of HCC's assets and liabilities. The Bigtime shares the were distributed to HCC's shareholders, and HCC was liquidated.
Immediately prior to the combination, HCC's balance sheet appeared as follows, with fair value also indicated: 

Required:
a. Prepare all journal entries that Bigtime should have entered on its books to record the business combination.
b. Presentall journal entries that should have been entered on HCC's books to record the combination and the distribution of the stock received.







EXERCISE SOLUTIONS

a. Journal entries on the books of Bigtime Industries to record the combination:


Computation of goodwill


b. Journal entries on the books of HCC to record the combination:





 
Toggle Footer