The following are pre-acquisition financial balances for Palladium Corporation and Seminary Corporation as of December 31. Also included are fair values for Seminary Corporation accounts.

	Paladium Book Values December 31		Seminary Book Values December 31		Seminary Fair Values December 31
	Debit	Credit	Debit	Credit	Debit	Credit
Cash	420,000		120,000		120,000
Receivables	220,000		300,000		280,000
Inventory	410,000		210,000		200,000
Land	600,000		130,000		190,000
Building and equipment (net)	600,000		270,000		340,000
Franchise agreements	220,000		190,000		240,000
Accounts payable		300,000		120,000		160,000
Accrued expenses		110,000		30,000		40,000
Long-term liabilities		900,000		510,000		510,000
Common stock - $20 par value		660,000
Common stock - $5 par value				210,000
Additional paid-in capital		70,000		90,000
Retained earnings – Jan 1		390,000		240,000
Revenues		980,000		330,000
Expenses	940,000		310,000
Totals	3.410,000	3,410,000	1,530,000	1,530,000

On December 31, Palladium acquires Seminary’s outstanding stock by paying $380,000 in cash and issuing 10,000 shares of its own common stock with a fair value of $40 per share. Palladium paid legal and accounting fees of $30,000 as well as $5,000 in stock issuance costs.

Required:

1. Record the investment by Palladium in Seminary using the Equity Method of Accounting.
2. Unrelated to part a above, treat the acquisition of Seminary by Palladium as a net asset acquisition where Palladium acquires the assets and assumes the liabilities with the payment of cash and the issue of its common stock. Make a journal entry on the books of Palladium to record the net asset acquisition.

Answer rating: 100% (QA)

a Investment by Palladium in Seminary using the Equity Method of Accounting Determine the book value ... View the full answer