Car Inc. wants to purchase the net assets of Paint Inc. for purposes of horizontal consolidation and will pay $750,000 cash for them. The balance sheet for Paint Inc. on the date of purchase is as follows: Assets   Liabilities & Owners' Equity   Book Value Fair Market Value     Book Value Fair Market Value Cash $0 $0   A/P $75,000 $75,000 A/R 60,000 50,000   Notes Payable 25,000 25,000 Inventory 75,000 80,000   Mortgage Payable 50,000 50,000 Net Fixed Assets 150,000 200,000

FINANCIAL ACCOUNTING
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Author:Libby
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Chapter1: Financial Statements And Business Decisions
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Car Inc. wants to purchase the net assets of Paint Inc. for purposes of horizontal consolidation and will pay $750,000 cash for them. The balance sheet for Paint Inc. on the date of purchase is as follows:

Assets   Liabilities & Owners' Equity
  Book Value Fair Market Value     Book Value Fair Market Value
Cash $0 $0   A/P $75,000 $75,000
A/R 60,000 50,000   Notes Payable 25,000 25,000
Inventory 75,000 80,000   Mortgage Payable 50,000 50,000
Net Fixed Assets 150,000 200,000   Total Liabilities: $150,000  
Patents 0 25,000        
        Common Stock 50,000  
        Retained Earnings 85,000  
        Total Equity: $135,000  
             
Total Assets: $285,000     Total Liabilities & O.E.: $285,000  
             
A) Prepare the journal entry amounts for this asset acquisition on the books of Car Inc. by entering the proper debit and credit amounts in the gray-shaded cells below.
Account     Debits Credits
A/R        
Inventory        
Net Fixed Assets        
Patents        
Goodwill        
Cash        
A/P        
Notes Payable        
Mortgage Payable        
  Total   $0 $0
B) Prepare the journal entry amounts for this asset acquisition on the books of Paint Inc. by entering the proper debit and credit amounts in the gray-shaded cells below.
Account     Debits Credits
Cash        
A/P        
Notes Payable        
Mortgage Payable        
A/R        
Inventory        
Net Fixed Assets        

Gain on Sale of Net Assets

       
  Total   $0 $0
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