Liberty Inc. acquired 100% of the voting common stock of Valance Inc. on January 1, 2018 by issuing 4,000 shares of Liberty Inc. $40 par value common stock that had a fair value of $120 per share. Valance Inc. will dissolve after the acquisition. Liberty incurred $40,000 of legal and accounting fees; and paid $25,000 in stock issuance costs as a result of this acquisition. The book value and fair value of Valance’s accounts on that date (prior to creating the combination) along with the book value of Pace's accounts are shown below:

	Liberty	Valance	Valance
	Book	Book	Fair
	Value	Value	Value
Retained earnings, 1/1/18	$(250,000)	$(240,000)
Cash Receivables	100,000 70,000	20,000 50,000	$20,000 50,000
Inventory	230,000	170,000	210,000
Land	280,000	220,000	240,000
Buildings (net)	480,000	240,000	270,000
Equipment (net)	120,000	90,000	90,000
Liabilities	(650,000)	(430,000)	(420,000)
Common stock	(360,000)	(80,000)
Additional paid-in capital	(20,000)	(40,000)

Prepare all of the journal entries Liberty Inc. must make to record the acquisition of Valance Inc where Valance Inc. ceases to exist.

Answer rating: 100% (QA)

Fair value of net assets Cash 20000 Receivables 50000 Inventory 210000 Land 240000 Bu... View the full answer