Aurora Corp. acquired Payette Company on December 31, 2011. The following information concerning Payette€™s assets and liabilities was assembled on the acquisition date:

Instructions:
1. Make the journal entry necessary for Aurora Corp. to record the purchase, assuming the purchase price was $1,500,000 in cash.
2. Why might Aurora be willing to pay such a high price for Payette?
3. Repeat (1), assuming the purchase price is $350,000.
4. Repeat (1), assuming the purchase price is$150,000.

Transcribed Image Text:

Per Company's Books As Adjusted by Appraisal and Audit Assets Current assets Land, buildings, and equipment (net) $307,000 179,200 $486,200 $340,000 260,000 $600,000 Liabilities Current Iablties...-*._.--- Long-term Habilities (25.000) (160,000) $ 301,200 (25.000) (160,000) $415,000 Net assets