P Company acquired the assets and assumed the liabilities of S Company on January 1, 2010, for
Question:
P Company acquired the assets and assumed the liabilities of S Company on January 1, 2010, for $510,000 when S Company’s balance sheet was as follows:
S COMPANY
Balance Sheet
January 1, 2010
Cash..................$ 96,000
Receivables...............55,200
Inventory...............110,400
Land..................169,200
Plant and equipment (net) .........466,800
Total..................$897,600
Accounts payable............. $ 44,400
Bonds payable, 10%, due 12/31/2015, Par...480,000
Common stock, $2 par value.......120,000
Retained earnings...........253,200
Total..................$897,600
Fair values of S Company’s assets and liabilities were equal to their book values except for the following:
1. Inventory has a fair value of $126,000.
2. Land has a fair value of $198,000.
3. The bonds pay interest semiannually on June 30 and December 31. The current yield rate on bonds of similar risk is 8%.
Required:
Prepare the journal entry on P Company’s books to record the acquisition of the assets and assumption of the liabilities of S Company.
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...
Step by Step Answer:
Cash 96000 Receivables 55200 Inventory 126000 Land 198000 Plant and Equipment 466800 Goodwill 137450 ...View the full answer
