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.



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  • CreatedMarch 13, 2015
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