Pretzel Company acquired the assets (except for cash) and assumed the liabilities of Salt Com- pany 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 Par Value Stock Common Preferred 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 Cash Accounts receivable (net of $11,000 allowance) Inventory-LIFO cost $ 10 100 Land Buildings and equipment (net) Total assets Current liabilities Bonds Payable, 10% Common stock, $5 par value Other contributed capital Retained earnings Total liabilities and stockholders' equity Book value $ 165,000 220,000 275,000 396,000 1,144,000 $2,200,000 Fair Value $ 25 100 $ 275,000 450,000 770,000 396,000 309,000 $2,200,000 Fair value $ 165,000 198,000 330,000 550,000 1,144,000 $2,387,000 $ 275,000 495,000 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.
Pretzel Company acquired the assets (except for cash) and assumed the liabilities of Salt Com- pany 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 Par Value Stock Common Preferred 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 Cash Accounts receivable (net of $11,000 allowance) Inventory-LIFO cost $ 10 100 Land Buildings and equipment (net) Total assets Current liabilities Bonds Payable, 10% Common stock, $5 par value Other contributed capital Retained earnings Total liabilities and stockholders' equity Book value $ 165,000 220,000 275,000 396,000 1,144,000 $2,200,000 Fair Value $ 25 100 $ 275,000 450,000 770,000 396,000 309,000 $2,200,000 Fair value $ 165,000 198,000 330,000 550,000 1,144,000 $2,387,000 $ 275,000 495,000 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.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:EXERCISE 2-3
Asset Purchase, Cash and Stock L06
Pretzel Company acquired the assets (except for cash) and assumed the liabilities of Salt Com-
pany 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
Par Value
Stock
Common
Preferred
$10
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
Cash
Accounts receivable (net of $11,000 allowance)
Inventory LIF cost
Land
Buildings and equipment (net)
Total assets
Current liabilities
Bonds Payable, 10%
Common stock, $5 par value
Other contributed capital
Retained earnings
Total liabilities and stockholders' equity
Book value
$ 165,000
220,000
275,000
396,000
1,144,000
$2,200,000
Fair Value
$ 25
100
$275,000
450,000
770,000
396,000
309,000
$2,200,000
Fair value
$ 165,000
198,000
330,000
550,000
1,144,000
$2,387,000
$ 275,000
495,000
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.
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