Delicious Delicacies acquires the assets and liabilities of Elegant Eateries for $10,000,000 cash. At that date, Elegant Eateries' balance sheet is as follows:
$$\begin{array} { l r l r }
\text { Assets } & { \text { Liabilities and Equity } } \
\hline \text { Current assets } & \$ 1,000,000 & \text { Current liabilities } & \$ 900,000 \
\text { Plant \& equipment, net } & 10,000,000 & \text { Long-term debt } & 8,000,000 \
& - & \text { Capital stock } & 2,100,000 \
\text { Total } & \$ 11,000,000 & \text { Total } & \$ 11,000,000
\end{array}$$ Elegant's current assets are overvalued by $500,000, and its plant and equipment is overvalued by $5,000,000. Elegant has previously unreported brand names of $4,000,000.
Required
Prepare the journal entry made by Delicious Delicacies to record its acquisition of Elegant Eateries.

Question

Delicious Delicacies acquires the assets and liabilities of Elegant Eateries for $10,000,000 cash. At that date, Elegant Eateries' balance sheet is as follows:
 $$\begin{array} { l r l r } 
\text { Assets } &  { \text { Liabilities and Equity } } \
\hline \text { Current assets } & \$ 1,000,000 & \text { Current liabilities } & \$ 900,000 \
\text { Plant \& equipment, net } & 10,000,000 & \text { Long-term debt } & 8,000,000 \
& - & \text { Capital stock } & 2,100,000 \
\text { Total } & \$ 11,000,000 & \text { Total } & \$ 11,000,000
\end{array}$$ Elegant's current assets are overvalued by $500,000, and its plant and equipment is overvalued by $5,000,000. Elegant has previously unreported brand names of $4,000,000.
Required
Prepare the journal entry made by Delicious Delicacies to record its acquisition of Elegant Eateries.

Quizplus · Accepted Answer

The Answer of Delicious Delicacies acquires the assets and liabilities of Elegant Eateries for $10,000,000 cash. At that date, Elegant Eateries' balance sheet is as follows:
 $$\begin{array} { l r l r } 
\text { Assets } &  { \text { Liabilities and Equity } } \
\hline \text { Current assets } & \$ 1,000,000 & \text { Current liabilities } & \$ 900,000 \
\text { Plant \& equipment, net } & 10,000,000 & \text { Long-term debt } & 8,000,000 \
& - & \text { Capital stock } & 2,100,000 \
\text { Total } & \$ 11,000,000 & \text { Total } & \$ 11,000,000
\end{array}$$ Elegant's current assets are overvalued by $500,000, and its plant and equipment is overvalued by $5,000,000. Elegant has previously unreported brand names of $4,000,000.
Required
Prepare the journal entry made by Delicious Delicacies to record its acquisition of Elegant Eateries.

Delicious Delicacies Acquires the Assets and Liabilities of Elegant Eateries