Problem: TOM Inc has decided to purchase 100% the voting shares of JERRY by issuing common shares with a market value of $400,000 on July 1, 2022. On the date, the balance sheets of each of these companies were as follows:
| TOM Inc |
JERRY Inc |
|
| Cash and Short-Term Securities |
$900,000 |
$200,000 |
| Inventory |
$50,000 |
$120,000 |
| Plant and Equipment (net) |
$350,000 |
$150,000 |
| Goodwill |
$- |
$80,000 |
| Total Assets |
$1,300,000 |
$550,000 |
| Current Liabilities |
$180,000 |
$160,000 |
| Bonds Payable |
$400,000 |
$100,000 |
| Common Shares |
$500,000 |
$200,000 |
| Retained Earnings |
$220,000 |
$90,000 |
| Total Liabilities and Equity |
$1,300,000 |
$550,000 |
On that date, the fair values of JERRY Assets and Liabilities were as follows:
| Cash and Short-Term Securities |
$200,000 |
| Inventory |
$90,000 |
| Plant and Equipment (net) |
$250,000 |
| Current Liabilities |
$160,000 |
| Bonds Payable |
$88,000 |
In addition to the above, an independent appraiser deemed that JERRY Inc. had trademarks with a fair market value of $100,000 which had not been accounted for.
Based on the information provided:
a) Calculate the amount of Goodwill arising from this combination.
b) Journal entry to record TOM's acquisition of JERRY's shares.
c) TOM's Consolidated Balance Sheet immediately following its acquisition of JERRY's voting shares.