Ask Question
6 February, 00:24

1. Sheetz Company is purchased by Pulsar Corporation, at an acquisition cost that is $25,000,000 greater than the fair value of the identifiable net assets acquired. One of the assets acquired is a building, originally valued at $15,000,000 at the date of the purchase. Six months after the acquisition, it is discovered that the building was actually worth $7,000,000 at the date of acquisition. What entry is made to reflect this new information? a. Dr. goodwill; Cr. building for $8,000,000 b. Dr. loss on building; Cr. building for $8,000,000 c. Dr. retained earnings; Cr. building for $8,000,000 d. No entry is made

+2
Answers (1)
  1. 6 February, 01:39
    0
    a. Dr goodwill; credit building for $8,000,000

    Explanation:

    Goodwill refers to excess of purchase consideration over net assets value of an entity in case of acquisition.

    Goodwill is an intangible asset which is recorded as follows on the date of acquisition.

    Journal entry for Goodwill is;

    Goodwill A/C Dr

    Net Assets Acquired Dr.

    To Purchase Consideration

    (Being goodwill recorded)

    In the given case, building was acquired for $15,000,000 against it's fair value which was only $7,000,000. The excess price paid for such acquisition represents goodwill which shall be recorded as;

    Goodwill A/C ($15,000,000 - $7,000,000) Dr. $8,000,000

    To Building $8,000,000

    (Being goodwill recorded)
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “1. Sheetz Company is purchased by Pulsar Corporation, at an acquisition cost that is $25,000,000 greater than the fair value of the ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers