Question

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

	Book Value			Fair Value
Inventory	$	300,000		$	248,250
Land		816,000			1,085,250
Buildings		2,050,000			2,375,500
Customer relationships		0			822,750
Accounts payable		(100,000	)		(100,000	)
Common stock		(2,000,000	)
Additional paid-in capital		(500,000	)
Retained earnings 1/1		(395,000	)
Revenues		(454,500	)
Expenses		283,500

Arturo Company pays $3,470,000 cash and issues 24,300 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 $25,800 and Arturo pays $47,400 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

Account Titles and Explanation	Debit	Credit
Inventory	248250
Land	1085250
Buildings	2375500
Customer Relationships	822750
Goodwill	253250
Accounts payable		100000
Common Stock		48600	=24300*2
Additional Paid-In Capital		1166400	=24300*(50-2)
Cash		3470000
Account Titles and Explanation	Debit	Credit
Professional Services Expense	47400
Cash		47400
To record legal fees related to the combination.
Account Titles and Explanation	Debit	Credit
Additional Paid-In Capital	25800
Cash		25800
To record payment of stock issuance costs.