The Chan Corporation purchased the net assets (existing liabilities were assumed) of the Don Company for $900,000 cash.The balance sheet for the Don Company on the date of acquisition showed the following:
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Required:
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The equipment has a fair value of $300,000, and the plant assets have a fair value of $500,000.Assume that the Chan Corporation has an effective tax rate of 40%.Prepare the entry to record the purchase of the Don Company for each of the following separate cases with specific added information:
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a.The sale is a nontaxable exchange to the seller that limits the buyer to depreciation and amortization on only book value for tax purposes.?
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b.The bonds have a current fair value of $190,000.The transaction is a taxable exchange.?
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c.There are $100,000 of prior-year losses that can be used to claim a tax refund.The transaction is a taxable exchange.?
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d.There are $150,000 of past losses that can be carried forward to future years to offset taxes that will be due.The transaction is a taxable exchange.?

Question

The Chan Corporation purchased the net assets (existing liabilities were assumed) of the Don Company for $900,000 cash.The balance sheet for the Don Company on the date of acquisition showed the following:
?
?
  Required:
?
The equipment has a fair value of $300,000, and the plant assets have a fair value of $500,000.Assume that the Chan Corporation has an effective tax rate of 40%.Prepare the entry to record the purchase of the Don Company for each of the following separate cases with specific added information:
? 
a.The sale is a nontaxable exchange to the seller that limits the buyer to depreciation and amortization on only book value for tax purposes.?
?
b.The bonds have a current fair value of $190,000.The transaction is a taxable exchange.?
?
c.There are $100,000 of prior-year losses that can be used to claim a tax refund.The transaction is a taxable exchange.?
?
d.There are $150,000 of past losses that can be carried forward to future years to offset taxes that will be due.The transaction is a taxable exchange.?

Quizplus · Accepted Answer

The Answer of The Chan Corporation purchased the net assets (existing liabilities were assumed) of the Don Company for $900,000 cash.The balance sheet for the Don Company on the date of acquisition showed the following:
?
?
  Required:
?
The equipment has a fair value of $300,000, and the plant assets have a fair value of $500,000.Assume that the Chan Corporation has an effective tax rate of 40%.Prepare the entry to record the purchase of the Don Company for each of the following separate cases with specific added information:
? 
a.The sale is a nontaxable exchange to the seller that limits the buyer to depreciation and amortization on only book value for tax purposes.?
?
b.The bonds have a current fair value of $190,000.The transaction is a taxable exchange.?
?
c.There are $100,000 of prior-year losses that can be used to claim a tax refund.The transaction is a taxable exchange.?
?
d.There are $150,000 of past losses that can be carried forward to future years to offset taxes that will be due.The transaction is a taxable exchange.?

The Chan Corporation Purchased the Net Assets (Existing Liabilities Were