Assume the same information from Exercise 3-8. In addition, Peep Inc. incurred the following direct costs:

Before the acquisition consummation date, $90,000 of the direct costs was charged to a deferred charges account pending the completion of the acquisition. The remaining $7,000 has not been accrued or paid.

Required:
Prepare the journal entry to record both the acquisition and the direct costs.

Data from in Exercise 3-8

On February 1, 2024, Punto Company purchased 95% of the outstanding common stock of Sara Company and 85% of the outstanding common stock of Rob Company. Immediately before the two acquisitions, balance sheets of the three companies were as follows:

The following additional information is relevant.

1. One week before the acquisitions, Punto Company had advanced $10,000 to Sara Company and $5,000 to Rob Company. Sara Company recorded an increase to Accounts Payable for its advance, but Rob Company had not recorded the transaction.

2. On the date of acquisition, Punto Company owed Sara Company $12,000 for purchases on account, and Rob Company owed Punto Company $3,000 and Sara Company $6,000 for such purchases. The goods purchased had all been sold to outside parties prior to acquisition.

3. Punto Company exchanged 13,400 shares of its common stock with a fair value of $12 per share for 95% of the outstanding common stock of Sara Company. In addition, stock issue fees of $4,000 were paid in cash. The acquisition was accounted for as a purchase.

4. Punto Company paid $50,000 cash for the 85% interest in Rob Company.

5. Three thousand dollars of Sara Company’s notes payable and $9,500 of Rob Company’s notes payable were payable to Punto Company.

6. Assume that for Sara, any difference between book value and the value implied by the purchase price relates to subsidiary land. However, for Rob, assume that any excess of book value over the value implied by the purchase price is due to overvalued buildings.

Transcribed Image Text:

Accounting fees for the purchase Legal fees for registering the common stock Other legal fees for the acquisition Travel expenses to meet with Shy managers SEC filing fees $15,000 30,000 45,000 5,000 2,000 $97,000