In: Accounting
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.) |
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. |