Chapter 3 Question

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University of Notre Dame **We aren't endorsed by this school
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AA 0P
Subject
Accounting
Date
Nov 19, 2023
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3
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Problem 3-1 Lo3 The balance sheets of Lanigan Ltd. and Macklin Co. on December 31, Year 2, just before the transaction described below, were as follows: Lanigan Macklin Cash and receivables $ 602,000 $ 155,000 Inventory 210,000 110,000 Buildings and equipment (net) 320.000 200,000 Current liabilities $ 192,000 $85,000 Long-term debt 350,000 130,000 Common shares 200,000 110,000 Retained earnings 390.000 140,000 On December 31, Year 2, Lanigan purchased all of Macklin's assets and assumed all of Macklin's liabilities for $250,000 in cash. Coincidentally, the carrying amounts of Macklin's assets and liabilities were equal to fair value. Required (a) Prepare the journal entries for Lanigan Ltd. and for Macklin Co. to record this transaction. (b) Prepare balance sheets for Lanigan Ltd. and for Macklin Co. at December 31, Year 2, after recording the transaction noted above.
Problem 3-2 Lo3 The balance sheets of Rodriguez Ltd. and Vancouver Co. on December 31, Year 2, just before the transaction described below, were as follows: Rodriguez Vancouver Cash and receivables $ 301,000 $ 55,000 Inventory 105,000 140,000 Property and equipment (net) 160.000 270,000 $566.000 $465.000 Current liabilities $ 96,000 $110,000 Long-term debt 175,000 125,000 Common shares 100,000 150,000 Retained earnings 195.000 80,000 $566.000 $465.000 On December 31, Year 2, Rodriguez purchased 100% of Vancouver's common shares for $230,000 in cash. Coincidentally, the carrying amounts of Vancouver's assets and liabilities were equal to fair value. Required (a) Prepare the journal entries, if any, for Rodriguez Ltd. and for Vancouver Co. to record this transaction. (b) Prepare balance sheets for Rodriguez Ltd. and for Vancouver Co. at December 31, Year 2, after recording the transaction noted above. (c) Prepare a consolidated balance sheet for Rodriquez Ltd. after the transaction noted above.
Problem 3-5 Lo3 Bagley Incorporated's statement of financial position as at July 31, Year 4, is as follows: BAGLEY INCORPORATED STATEMENT OF FINANCIAL POSITION At July 31, Year 4 Carrying Amount Plant and equipment (net) $ 913,000 Patents Current assets 458.000 $1.371.000 Ordinary shares $ 185,000 Retained earnings 517,000 Long-term debt 393.000 Current liabilities 276,000 $1.371.000 Fair Value $1,056,000 81,000 510,000 419,000 276,000 On August 1, Year 4, the directors of Bagley considered a takeover offer from Davis Inc., in which the corporation would sell all of its assets and liabilities. Davis's costs of investigation and drawing up the merger agreement would amount to $21,000. Required (a) Assume that Davis made a $1,090,600 cash payment to Bagley for its net assets. Prepare the journal entries in the accounting records of Davis to record the business combination.
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