On April 1, 2019, the Balance Sheets of Optimum Inc

question 28

Essay

On April 1, 2019, the balance sheets of Optimum Inc. and Electra Inc. were as follows:
$\begin{array}{|l|r|r|}\hline & \text { Optimum Inc } & \text { Electra Inc } \\\hline \begin{array}{l}\text { Cash and Short-Term } \\\text { Securities }\end{array} & \$ 380,000 & \$ 20,000 \\\hline \text { Inventory } & \$ 50,000 & \$ 10,000 \\\hline \text { Plant and Equipment (net) } & \$ 320,000 & \$ 120,000 \\\hline \text { Total Assets } & \$ 750,000 & \$ 150,000 \\\hline \text { Current Liabilities } & \$ 75,000 & \$ 15,000 \\\hline \text { Bonds Payable } & \$ 100,000 & \$ 30,000 \\\hline \text { Common Shares } & \$ 150,000 & \$ 55,000 \\\hline \text { Retained Earnings } & \$ 425,000 & \$ 50,000 \\\hline \text { Total Liabilities and Equity } & \$ 750,000 & \$ 150,000 \\\hline\end{array}$ On that date, the fair values of Electra's Assets and Liabilities were as follows:
$\begin{array}{|l|r|}\hline \text { Short-Term Securities } & \$ 32,000 \\\hline \text { Inventory } & \$ 5,000 \\\hline \text { Plant and Equipment (net) } & \$ 150,000 \\\hline \text { Current Liabilities } & \$ 15,000 \\\hline \text { Bonds Payable } & \$ 28,000\\\hline \end{array}$ On April 1, 2019, Optimum issued 5,000 new common shares with a market value of $50.00 per share as consideration for Electra's net assets. Prior to the issue, Optimum had 10,000 outstanding common shares.
Required:
a) Calculate the amount of Goodwill arising from this combination.
b) Prepare the journal entry to record Optimum's acquisition of Electra's assets.
c) Prepare Optimum's Consolidated Balance Sheet immediately following its acquisition of Electra's assets.
d) Prepare Electra's Balance Sheet following the acquisition.

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Definitions:

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