Keen Inc and Lax Inc Had the Following Balance Sheets

question 11

Essay

Keen Inc and Lax Inc had the following balance sheets on October 31, 2019:
$\begin{array}{|l|r|r|r|}\hline & \text { Keen Inc } & \text { Lax Inc } & \text { Lax Inc } \\\hline & \text { (carrying value) } & \text { (carrying value) } & \text { (fair value) } \\\hline \text { Cash } & \$ 300,000 & \$ 80,000 & \$ 80,000 \\\hline \text { Accounts Receivable } & \$ 60,000 & \$ 24,000 & \$ 24,000 \\\hline \text { Inventory } & \$ 30,000 & \$ 54,000 & \$ 50,000 \\\hline \text { Plant and Equipment (net) } & \$ 310,000 & \$ 280,000 & \$ 300,000 \\\hline \text { Trademark } & & \$ 12,000 & \$ 16,000 \\\hline \text { Total Assets } & \$ 700,000 & \$ 450,000 \\\hline \text { Accounts Payable } & \$ 150,000 & \$ 200,000 &\$200,000\\\hline \text { Bonds Payable } & \$ 400,000 & \$ 120,000&\$100,000 \\\hline \text { Common Shares } & \$ 100,000 & \$ 60,000 \\\hline \text { Retained Earnings } & \$ 50,000 & \$ 70,000 \\\hline \text { Total Liabilities and Equity } & \$ 700,000 & \$ 450,000 \\\hline\end{array}$ Assuming that Keen Purchases 80% of Lax for a cash consideration of $240,000 on November 1, 2019, prepare (under the Fair Value Enterprise Method):
a) the journal entry that Keen Inc. would make to record the acquisition;
b) the elimination entry necessary to produce consolidated balance sheet on the acquisition date.

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Definitions:

Risky Shift

In group decision making, the tendency for decisions made in groups after discussion to be riskier than decisions made by individual members prior to discussion.

Risk Avoidant

Characterizes individuals or strategies that prioritize minimizing potential losses or risks.

Justice Principle

The ethical concept that emphasizes fairness and the equitable treatment of individuals in decision-making processes and distribution of resources.

Profits

The financial gain obtained when the revenue generated from business activities exceeds the expenses, costs, and taxes needed to sustain the activity.