Question

The following book and fair values were available for Westmont Company as of March 1.

	Book Value			Fair Value
Inventory	$	333,250		$	281,250
Land		794,250			1,059,000
Buildings		2,025,000			2,385,750
Customer relationships		0			820,500
Accounts payable		(94,500	)		(94,500	)
Common stock		(2,000,000	)
Additional paid-in capital		(500,000	)
Retained earnings 1/1		(396,000	)
Revenues		(473,500	)
Expenses		311,500

Arturo Company pays $3,900,000 cash and issues 29,000 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 $26,600 and Arturo pays $45,000 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 required" in the first account field.

Answer 1

Journal entries of Arturo's to record its acquisition of Westmont.

Sr no	Account Title And Explanation	Debit	Credit
1)	Inventory A/c	$281,250
	Land A/c	$1,059,000
	Building A/c	$2,385,750
	Customer relationship A/c	$820,500
	Goodwill A/c (Balancing figure)	$898,000
	Account payable A/c		$94,500
	Common stock A/c ( 29000 * 2)		$58,000
	Additional paid in capital A/c ( 29000 * 48)		$1,392,000
	Cash A/c		$3,900,000
	(Being take over of assets and liabilities of Westmont recorded)
2)	Legal fees A/c	$45,000
	Cash A/c		$45,000
	(Being payment of legal fees recorded)
3)	Stock issue cost A/c	$26,600
	Cash A/c		$26,600
	(Being payment of stock issue cost recorded)