P Company acquired the assets and assumed the liabilities of S Company on January 1, 2018, for $510,000 when S Company's balance sheet was as follows: S COMPANY Balance Sheet January 1, 2018 Cash $ 96,000 Receivables 55,200 Inventory 110,400 Land 169,200 Plant and equipment (net) 466,800 Total $897,600 ccounts payable $ 44,400 Bonds payable, 10%, due 12/31/2023, Par Common stock, $2 par value 480,000 120,000 Retained earnings 253,200 Total $897,600 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 $126,000. 2. Land has a fair value of $198,000. 3. The bonds pay interest semiannually on June 30 and December 31. The current yield rate on bonds of similar risk is 8%. Prepare the journal entry on P Company's books to record the acquisition of the assets and assumption of the liabilities of S Company.
P Company acquired the assets and assumed the liabilities of S Company on January 1, 2018, for $510,000 when S Company's balance sheet was as follows: S COMPANY Balance Sheet January 1, 2018 Cash $ 96,000 Receivables 55,200 Inventory 110,400 Land 169,200 Plant and equipment (net) 466,800 Total $897,600 ccounts payable $ 44,400 Bonds payable, 10%, due 12/31/2023, Par Common stock, $2 par value 480,000 120,000 Retained earnings 253,200 Total $897,600 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 $126,000. 2. Land has a fair value of $198,000. 3. The bonds pay interest semiannually on June 30 and December 31. The current yield rate on bonds of similar risk is 8%. Prepare the journal entry on P Company's books to record the acquisition of the assets and assumption of the liabilities of S Company.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:P Company acquired the assets and assumed the liabilities of S
Company on January 1, 2018, for $510,000 when S Company's
balance sheet was as follows:
S COMPANY
Balance Sheet
January 1, 2018
Cash
$ 96,000
Receivables
55,200
Inventory
110,400
Land
169,200
Plant and equipment (net)
466,800
Total
$897,600
Accounts payable
$ 44,400
Bonds payable, 10%, due 12/31/2023, Par
Common stock, $2 par value
480,000
120,000
Retained earnings
253,200
Total
$897,600
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 $126,000.
2. Land has a fair value of $198,000.
3. The bonds pay interest semiannually on June 30 and December
31. The current yield rate on bonds of similar risk is 8%.
Prepare the journal entry on P Company's books to record the
acquisition of the assets and assumption of the liabilities of S
Company.
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