Answer:
See the explanation below:
Explanation:
The merged details are first sorted as follows:
Details Book Value ($) Fair Value ($)
Accounts receivable 1,800,000 1,625,000
Inventories 2,700,000 4,000,000
Property Plant and Equipment 9,000,000 11,625,000
Accounts payable 3,000,000 3,000,000
Bonds payable 4,500,000 4,125,000
The calculation will now be done using the fair value as follows:
Total fair value of assets = $1,625,000 + 4,000,000 + 11,625,000 = $17,250,000
Total fair value of liabilities = $3,000,000 + 4,125,000 = $7,125,000
Fair Value of Miller Inc. Equity = $17,250,000 - $7,125,000 = $10,125,000
Goodwill from the acquisition = $12,000,000 - $10,125,000 = $1,875,000
The journal entries will look as follows:
<u>Details Dr ($) Cr ($) </u>
Goodwill 1,875,000
Miller Inc. Equity acquired 10,125,000
Cash 12,000,000
<u>To record the acquisition Miller Inc. </u>
