Midland States Telecom provides communication services in lo

Midland States Telecom provides communication services in lowa, Nebraska, the Dakotas, and Montana. Midland States Telecom purchased goodwill as part of the acquisition of Sheldon Wireless Enterprises, which had the following figures Requirement 1. Journalize the entry to record Midland State Telecom\'s purchase of Sheldon Wireless for $440,000 cash plus a $660,000 note payable. (Record debits first, then credits. Select the explanation on the last line of the journal entry table.) Date Accounts and Explanation Debit Credit Data Table Book value of assets 900,000 1,400,000 530,000 Market value of assets Market value of liabilities

Solution

Journal Entries Date Account Title and explanation Debit Credit Business Purchase $            11,00,000        To Liquidator of Sheldon Wireless $               11,00,000 (To Record the purchase of business) Assets $            14,00,000 Goodwill $               2,30,000      To Liabilities $                 5,30,000       To Business Purchase $               11,00,000 (To Record the purchase of Business) Liquidator of Sheldon Wireless $            11,00,000       To Cash $                 4,40,000       To Note Payable Account $                 6,60,000 (To Record the payment against purchase consideration) CALCULATION OF THE GOODWILL OR CAPITAL RESERVE ON PURCHASE OF SHARES Market value of the assets = $            14,00,000 Less: Market Value Liabilities = $               5,30,000 Net Assets purchase $               8,70,000 Less: Amount paid against purchased Cash $               4,40,000 Note Payable $               6,60,000 Total $            11,00,000 Pruchase value is more so the difference is a Goodwill = $               2,30,000