On June 30, 2013, Stampol Company ceased operations and all of their assets and liabilities were purchased
Question:
On June 30, 2013, Stampol Company ceased operations and all of their assets and liabilities were purchased by Postoli Incorporated. Postoli paid $40,000 in cash to the owner of Stampol, and signed a five-year note payable to the owners of Stampol in the amount of $200,000. Their closing balance sheets as of June 30, 2013 are shown below. In the purchase agreement, both parties noted that Inventory was undervalued on the books by $10,000, and Pistoli would also take possession of a customer list with a fair value of $18,000. Pistoli paid all legal costs of the acquisition, which amounted to $7,000.
Required:
1. Prepare the journal entry Postoli would record at the date of acquisition.
2. Prepare the journal entry Stampol would record at the date of acquisition.
Intermediate accounting
ISBN: 978-0077647094
7th edition
Authors: J. David Spiceland, James Sepe, Mark Nelson