P Company acquired the assets and assumed the liabilities of S Company on January 1, 2018,...

P Company acquired the assets and assumed the liabilities of S Company on January 1, 2018, for $510,000 when S Company's balance sheet was as follows:

S COMPANY Balance Sheet January 1, 2018
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 12/31/2023, 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:

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

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

Expert Solution

Particulars	Debit	Credit
Cash	96,000
Receivables	55,200
Inventory	1,26,000
Land	1,98,000
Plant and equipment (net)	4,66,800
Goodwill	92,400
Accounts payable		44,400
Bonds payable		4,80,000
Cash/Bank		5,10,000
Being consideration paid for acquiring S Company's assets and Liabilities

ekkarill92 answered 2 years ago

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