Pretzel Company acquired the assets (except for cash) and assumed the liabilities of Salt Company on January 2, 2020. As
Pretzel Company acquired the assets (except for cash) and assumed the liabilities of Salt Company on January 2, 2020. As
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Pretzel Company acquired the assets (except for cash) and
assumed the liabilities of Salt Company on January 2, 2020. 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 SheetY
January 2, 2020
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
$ 2,200,000 $ 2,387,000
$ 275,000 $
Total assets
Current liabilities
275,000
Bonds Payable, 10%
Common stock, $5 par value
450,000
495,000
770,000
Other contributed capital
Retained earnings
396,000
309,000
Total liabilities and
$ 2,200,000
stockholders' equity
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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