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Question: Asset Purchase of Another Company
CheapBeer Inc. wants to purchase the net assets of FancyBrew Inc. for purposes of horizontal consolidation and will pay $500,000 cash for them. The balance sheet for FancyBrew Inc. on the date of purchase is as follows:
FancyBrew Inc. Balance Sheet as of 5/15/17
Assets
Liabilities & Owners' Equity
Book Value
Fair Market Value
Cash
$0
A/P
$80,000
A/R
50,000
Notes Payable
25,000
Inventory
125,000
100,000
Mortgage Payable
70,000
Net Fixed Assets
175,000
200,000
Total Liabilities:
$175,000
Patents
0
Common Stock
75,000
Retained Earnings
Total Equity:
Total Assets:
$350,000
Total Liabilities & O.E.:
A) Prepare the journal entry amounts for this asset acquisition on the books of CheapBeer Inc by entering the proper dollar amounts in the gray-shaded cells. When correct, the cells will change color.
B) Prepare the journal entry amounts for this asset acquisition on the books of FancyBrew Inc. by entering the proper dollar amounts in the gray-shaded cells. When correct, the cells will change color.
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