Pluto Corporation purchased Saturn Corporations assets and liabilities for $4,500,000 in cash. Saturn's reported assets and liabilities
Question:
Pluto Corporation purchased Saturn Corporation’s assets and liabilities for $4,500,000 in cash. Saturn's reported assets and liabilities have the following fair values at the date of acquisition:
| Fair Value Dr (Cr) |
Cash, receivables | $ 5,000,000 |
Inventory | 7,000,000 |
Land and buildings | 30,000,000 |
Liabilities | (40,000,000) |
Saturn also has brand names, with a fair value of $4,000,000, that are not reported on its balance sheet.
a. Using a t-account template:
Prepare the acquisition entry assuming that Pluto is treating this transaction as a merger.
b. Using a t-account template:
Prepare the acquisition entry assuming that Pluto is treating this transaction as a stock acquisition.
Advanced Financial Accounting
ISBN: 978-0078025624
10th edition
Authors: Theodore E. Christensen, David M. Cottrell, Richard E. Baker