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Category > Accounting Posted 25 Sep 2017 My Price 9.00

Benz Company

Asset versus stock purchase. Benz Company is contemplating the purchase of the net assets of Cardinal Company for $800,000 cash. To complete the transaction, direct acquisition costs are $15,000. The balance sheet of Cardinal Company on the purchase date is as follows:

Cardinal Company Balance Sheet December 31, 20X1
Assets	Liabilities and Equity
Current assets	$80,000	Liabilities	$100,000
Land	50,000	Common stock ($10 par)	100,000
Building	450,000	Paid-in capital in excess of par	150,000
Accumulated depreciation, building	200,000	Retained earnings	230,000
Equipment	300,000
Accumulated depreciation, equipment	100,000
Total assets	$580,000	Total liabilities and equity	$580,000

The following fair values have been obtained for Cardinal’s assets and liabilities:

Current assets	$100,000
Land	75,000
Building	300,000
Equipment	275,000
Liabilities	102,000

1. Record the purchase of the net assets of Cardinal Company on Benz Company’s books.

2. Record the sale of the net assets on the books of Cardinal Company.

3. Record the purchase of 100% of the common stock of Cardinal Company on Benz’s books. Cardinal Company will remain a separate legal entity.

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Maurice Tutor

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Status NEW Posted 25 Sep 2017 03:09 PM My Price 9.00

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