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Business Combination with Goodwill Morton Co. paid cash of $ 178,000 to acquire Zink Company’s net assets on February 1, 2013. The balance sheet data for the two companies and fair value information for Zink immediately before the business combination were: Morton Corporation Zink Company Balance Sheet Item Book Value Book Value Fair Value Cash $ 240,000 $ 20,000 $ 20,000 Accounts Receivable 140,000 35,000 35,000 Inventory 170,000 30,000 50,000 Patents 80,000 40,000 60,000 Buildings & Equipment 380,000 310,000 150,000 Less: Accumulated Depreciation (190,000) (200,000) Total Assets $ 820,000 $235,000 $315,000 Accounts Payable $ 85,000 $ 55,000 $ 55,000 Notes Payable 150,000 120,000 120,000 Common Stock $ 10 par value 200,000 $ 6 par value 18,000 Additional Paid-In Capital 160,000 10,000 Retained Earnings 225,000 32,000 Total Liabilities and Equities $ 820,000 $235,000 Required: a. Give the journal entry anchored by Morton Corporation when it acquired Zink’s net assets. b. Prepare a balance sheet for Morton immediately following the acquisition. c. Give the journal entry to be recorded by Morton if it acquires all of Zink’s common stock (instead of Zink’s net assets) for $178,000.

Business Combination with Goodwill

Morton Co. paid cash of $ 178,000 to acquire Zink Company’s net assets on February 1, 2013. The balance sheet data for the two companies and fair value information for Zink immediately before the business combination were:

Morton Corporation Zink Company
Balance Sheet Item Book Value Book Value Fair Value
Cash $ 240,000 $ 20,000 $ 20,000
Accounts Receivable 140,000 35,000 35,000
Inventory 170,000 30,000 50,000
Patents 80,000 40,000 60,000
Buildings & Equipment 380,000 310,000 150,000
Less: Accumulated Depreciation (190,000) (200,000)
Total Assets $ 820,000 $235,000 $315,000

Accounts Payable $ 85,000 $ 55,000 $ 55,000
Notes Payable 150,000 120,000 120,000
Common Stock
$ 10 par value 200,000
$ 6 par value 18,000
Additional Paid-In Capital 160,000 10,000
Retained Earnings 225,000 32,000
Total Liabilities and Equities $ 820,000 $235,000

Required:
a. Give the journal entry anchored by Morton Corporation when it acquired Zink’s net assets.
b. Prepare a balance sheet for Morton immediately following the acquisition.
c. Give the journal entry to be recorded by Morton if it acquires all of Zink’s common stock (instead of Zink’s net assets) for $178,000.

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