Prepare the journal entry on p companys books

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Reference no: EM13516762

Asset Purchase, Cash

P Company acquired the assets and assumed the liabilities of S Company on January 1, 2010, for $510,000 when S Company"s balance sheet was as follows:

S COMPANY Balance Sheet January 1, 2010

Cash

$ 96,000

Receivables

55,200

Inventory

110,400

Land

169,200

Plant and equipment (net)

466,800

Total

$897,600

Accounts payable

$ 44,400

Bonds payable, 10%, due 12/31/2015, Par

480,000

Common stock, $2 par value

120,000

Retained earnings

253,200

Total

$897,600

Fair values of S Company"s assets and liabilities were equal to their book values except for the following:

  1. Inventory has a fair value of $126,000.
  2. Land has a fair value of $198,000.
  3. The bonds pay interest semiannually on June 30 and December 31. The current yield rate on bonds of similar risk is 8%.

Required:

Prepare the journal entry on P Company"s books to record the acquisition of the assets and assumption of the liabilities of S Company.

Reference no: EM13516762

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