Reference no: EM13554575
On January 4, 2011, D'Angelo Company acquired all of the net assets (assets and liabilities) of Barato Company for $124,000 cash. The two companies merged, with D'Angelo Company surviving. On the date of acquisition, Barato's balance sheet included the following.
Barato
Balance Sheet at January 4, 2011 Company
Cash .............................................. $23,000
Property and equipment (net) .................. 65,000
Total assets ....................................... $88,000
Liabilities ......................................... $12,000
Common stock (par $5) ......................... 40,000
Retained earnings ................................. 36,000
Total liabilities and stockholders' equity ...... $88,000
The property and equipment had a fair value of $72,000. Barato also owned an internally developed patent with a fair value of $4,000. The book values of the cash and liabilities were equal to their fair values.
Required:
1. How much goodwill was involved in this merger? Show computations.
2. Give the journal entry that D'Angelo would make to record the merger on January 4, 2011.