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The following book and fair values were available for Westmont Company as of March 1. Fair Value Book Value $ Inventory Land Buildings Customer relationships Accounts payable Common stock Additional paid-in capital Retained earnings, 1/1 Revenues Expenses 630,000 750,000 1,700,000 0 (80,000 ) (80,000 ) (2,000,000) (500,000 ) (360,000 ) $ 600,000 990,000 2,000,000 800,000 (420,000 ) 280,000 Arturo Company pays $4,000,000 cash and issues 20,000 shares of its $2 par value common stock (fair value of $50 per share) for all of Westmont's common stock in a merger, after which Westmont will cease to exist as a separate entity. Stock issue costs amount to $25,000, and Arturo pays $42,000 for legal fees to complete the transaction. a) Prepare Arturo's journal entries to record its acquisition of Westmont. b) Record the legal fees related to the combination. d) Record the payment of stock issuance costs. please give explanations with answer.

The following book and fair values were available for Westmont Company as of March 1. Fair Value Book Value $ Inventory Land Buildings Customer relationships Accounts payable Common stock Additional paid-in capital Retained earnings, 1/1 Revenues Expenses 630,000 750,000 1,700,000 0 (80,000 ) (80,000 ) (2,000,000) (500,000 ) (360,000 ) $ 600,000 990,000 2,000,000 800,000 (420,000 ) 280,000 Arturo Company pays $4,000,000 cash and issues 20,000 shares of its $2 par value common stock (fair value of $50 per share) for all of Westmont's common stock in a merger, after which Westmont will cease to exist as a separate entity. Stock issue costs amount to $25,000, and Arturo pays $42,000 for legal fees to complete the transaction. a) Prepare Arturo's journal entries to record its acquisition of Westmont. b) Record the legal fees related to the combination. d) Record the payment of stock issuance costs. please give explanations with answer.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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The following book and fair values were available for Westmont Company as of March 1. Fair Value Book Value $ Inventory Land Buildings Customer relationships Accounts payable Common stock Additional paid-in capital Retained earnings, 1/1 Revenues Expenses 630,000 750,000 1,700,000 0 (80,000 (2,000,000) (500,000 ) ) (80,000 ) (360,000 ) $ 600,000 990,000 2,000,000 800,000 (420,000 ) 280,000 Arturo Company pays $4,000,000 cash and issues 20,000 shares of its $2 par value common stock (fair value of $50 per share) for all of Westmont's common stock in a merger, after which Westmont will cease to exist as a separate entity. Stock issue costs amount to $25,000, and Arturo pays $42,000 for legal fees to complete the transaction. a) Prepare Arturo's journal entries to record its acquisition of Westmont. b) Record the legal fees related to the combination. d) Record the payment of stock issuance costs. please give explanations with answer.
Transcribed Image Text:The following book and fair values were available for Westmont Company as of March 1. Fair Value Book Value $ Inventory Land Buildings Customer relationships Accounts payable Common stock Additional paid-in capital Retained earnings, 1/1 Revenues Expenses 630,000 750,000 1,700,000 0 (80,000 (2,000,000) (500,000 ) ) (80,000 ) (360,000 ) $ 600,000 990,000 2,000,000 800,000 (420,000 ) 280,000 Arturo Company pays $4,000,000 cash and issues 20,000 shares of its $2 par value common stock (fair value of $50 per share) for all of Westmont's common stock in a merger, after which Westmont will cease to exist as a separate entity. Stock issue costs amount to $25,000, and Arturo pays $42,000 for legal fees to complete the transaction. a) Prepare Arturo's journal entries to record its acquisition of Westmont. b) Record the legal fees related to the combination. d) Record the payment of stock issuance costs. please give explanations with answer.
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