On July 1, 2017, Novak Corporation purchased Young Company by paying $251,100 cash and issuing a $133,000 note payable to Steve Young. At July 1, 2017, the balance sheet of Young Company was as follows.

Cash $50,800 Accounts payable $206,000

Accounts receivable 91,700

Stockholders' equity 242,700 $448,700

Inventory 109,000

Land 40,200

Buildings (net) 75,100

Equipment (net) 70,000

Trademarks 11,900

$448,700

The recorded amounts all approximate current values except for land (fair value of $62,500), inventory (fair value of $125,700), and trademarks (fair value of $15,600).

Required:

Prepare the July 1 entry for Novak Corporation to record the purchase.

Cash $50,800

Accounts receivable $91,700

Inventory $125,700

Land $62,500

Buildings (net) $75,100

Equipment (net) $70,000

Trademarks $15,600

Goodwill $111,180 (Balancing figure)

To Accounts payable $206,000

To Note payable $133,000

To Cash $251,100

(Being the purchase is recorded)

Explanation:

The journal entry is shown below:

Cash $50,800

Accounts receivable $91,700

Inventory $125,700

Land $62,500

Buildings (net) $75,100

Equipment (net) $70,000

Trademarks $15,600

Goodwill $111,180 (Balancing figure)

To Accounts payable $206,000

To Note payable $133,000

To Cash $251,100

(Being the purchase is recorded)

For recording this we debited the assets as it increased the assets and credited the current liabilities as it also show rise in the current liabilities

In addition to this, the balancing figure is debited to goodwill account

Moreover, the fair value of land, inventory, and trademarks are considered while recording this journal entry