Advanced Accounting
14th Edition
ISBN: 9781260247824
Author: Joe Ben Hoyle, Thomas F. Schaefer, Timothy S. Doupnik
Publisher: RENT MCG
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Chapter 2, Problem 23P
The following book and fair values were available for Westmont Company as of March 1.
| Book Value | Fair Value | |
| Inventory | $ 630,000 | $ 600,000 |
| Land | 750,000 | 990,000 |
| Buildings | 1,700,000 | 2,000,000 |
| Customer relationships | –0– | 800,000 |
| Accounts payable | (80,000) | (80,000) |
| Common stock | (2,000,000) | |
| Additional paid-in capital | (500,000) | |
| (360,000) | ||
| Revenues | (420,000) | |
| Expenses | 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. Prepare Arturo’s
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The following book and fair values were available for Westmont Company as of March 1.
Book Value
Fair Value
Inventory
$
245,500
$
203,750
Land
820,500
1,072,500
Buildings
2,115,000
2,457,750
Customer relationships
0
833,250
Accounts payable
(96,000
)
(96,000
)
Common stock
(2,000,000
)
Additional paid-in capital
(500,000
)
Retained earnings, 1/1
(413,000
)
Revenues
(494,000
)
Expenses
322,000
Arturo Company pays $4,160,000 cash and issues 22,200 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 $31,900 and Arturo pays $51,200 for legal fees to complete the transaction.
Prepare Arturo’s journal entries to record its acquisition of Westmont.
The following book and fair values were available for Westmont Company as of March 1.
Book Value
Fair Value
Inventory
$
296,000
$
242,750
Land
766,500
1,034,250
Buildings
2,150,000
2,453,000
Customer relationships
0
846,750
Accounts payable
(106,500
)
(106,500
)
Common stock
(2,000,000
)
Additional paid-in capital
(500,000
)
Retained earnings 1/1
(428,000
)
Revenues
(467,000
)
Expenses
289,000
Arturo Company pays $3,400,000 cash and issues 25,400 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 $25,300 and Arturo pays $51,100 for legal fees to complete the transaction.
Prepare Arturo’s journal entry to record its acquisition of Westmont. (If no entry is required for a transaction/event, select "No journal entry…
The following book and fair values were available for Westmont Company as of March 1.
Book value
Fair value
Inventory
$ 630,000
$ 600,000
Land
750,000
990,000
Buildings
1,700,000
2,000,000
Customer relationships
–0–
800,000
Accounts payable
(80,000)
(80,000)
Common stock
(2,000,000)
Additional paid-in capital
(500,000)
Retained earnings, 1/1
(360,000)
Revenues
(420,000)
Expenses
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.
Required
Prepare Arturo’s journal entries to record its acquisition of Westmont.
Chapter 2 Solutions
Advanced Accounting
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