On January 2, 2014, Eagle Company Acquired 100% of Solly

question 39

Essay

On January 2, 2014, Eagle Company acquired 100% of Solly Company's common stock for $900,000 cash in a merger transaction. At this date, the book value of all of Solly Company's assets, except a building, was $700,000. The fair value of these assets without the building was $800,000. In addition to these assets is a building that has a book value of $400,000 and a fair value of $440,000. The book value and fair value of Solly's liabilities is $520,000.
Required:
A. Prepare a schedule to calculate the goodwill arising from the transaction.
B. Prepare the journal entry to record the merger on the books of Eagle Company at the acquisition date.

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Definitions:

Cash

A company's money in the form of currency or in bank accounts that is immediately available for business use.

FOB Destination

A shipping term indicating that the seller bears the shipping costs and retains ownership of the goods until they are delivered to the buyer's location.

Revenue Recognition

The accounting principle dictating the specific conditions under which revenue is recognized or accounted for.

Ownership Transfer

The process by which the title of property or assets is moved from one party to another, affecting legal rights and responsibilities.