P Company acquired the assets and assumed the liabilities of S Company on January 1, 2013, for $505,370 when S Company’s balance sheet was as follows: S COMPANY Balance Sheet January 1, 2013 Cash $94,842 Receivables 55,029 Inventory 111,504 Land 169,221 Plant and equipment (net) 474,560 Total $905,156 Accounts payable $44,244 Bonds payable, 9%, due 12/31/2018, Par 482,000 Common stock, $2 par value 122,000 Retained earnings 256,912 Total $905,156 Fair values of S Company’s assets and liabilities were equal to their book values except for the following: 1. Inventory has a fair value of $124,958. 2. Land has a fair value of $200,847. 3. The bonds pay interest semiannually on June 30 and December 31. The current yield rate on bonds of similar risk is 6%. Prepare the journal entry on P Company’s books to record the acquisition of the assets and assumption of the liabilities of S Company. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places, e.g. 5,275. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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P Company acquired the assets and assumed the liabilities of S Company on January 1, 2013, for $505,370 when S Company’s balance sheet was as follows:

S COMPANY Balance Sheet January 1, 2013
Cash		$94,842
Receivables		55,029
Inventory		111,504
Land		169,221
Plant and equipment (net)		474,560
Total		$905,156

Accounts payable		$44,244
Bonds payable, 9%, due 12/31/2018, Par		482,000
Common stock, $2 par value		122,000
Retained earnings		256,912
Total		$905,156

Fair values of S Company’s assets and liabilities were equal to their book values except for the following:

1.		Inventory has a fair value of $124,958.
2.		Land has a fair value of $200,847.
3.		The bonds pay interest semiannually on June 30 and December 31. The current yield rate on bonds of similar risk is 6%.

Prepare the journal entry on P Company’s books to record the acquisition of the assets and assumption of the liabilities of S Company. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places, e.g. 5,275. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

Account Titles and Explanation	Debit	Credit

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