Maurice Tutor
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Asset Purchase, Cash and Stock
Pretzel Company acquired the assets (except for cash) and assumed the liabilities of Salt Company on January 2, 2012. As compensation, Pretzel Company gave 30,000 shares of its common stock, 15,000 shares of its 10% preferred stock, and cash of $50,000 to the stockholders of Salt Company. On the acquisition date, Pretzel Company stock had the following characteristics:
|
PRETZEL COMPANY |
||
|
Stock |
Par Value |
Fair Value |
|
Common |
$10 |
$25 |
|
Preferred |
100 |
100 |
Immediately prior to the acquisition, Salt Company"s balance sheet reported the following book values and fair values:
SALT COMPANY Balance Sheet January 2, 2012
| Â |
Book value |
Fair value |
|
Cash |
$ 165,000 |
$ 165,000 |
|
Accounts receivable (net of $11,000 allowance) |
220,000 |
198,000 |
|
Inventory—LIFO cost |
275,000 |
330,000 |
|
Land |
396,000 |
550,000 |
|
Buildings and equipment (net) |
1,144,000 |
1,144,000 |
|
Total assets |
$2,200,000 |
$2,387,000 |
|
Current liabilities |
$ 275,000 |
$275,000 |
|
Bonds Payable, 10% |
450,000 |
495,000 |
|
Common stock, $5 par value |
770,000 |
 |
|
Other contributed capital |
396,000 |
 |
|
Retained earnings |
309,000 |
 |
|
Total liabilities and stockholders" equity |
$2,200,000 |
 |
Required:
Prepare the journal entry on the books of Pretzel Company to record the acquisition of the assets and assumption of the liabilities of Salt Company.