Purchase with goodwill. Smith Company was acquired by Rogers Corporation on July 1, 20X1. Rogers exchanged 60,000 shares of its $5 par stock, with a fair value of $20 per share, for the net assets of Smith Company. Rogers incurred the following costs as a result of this transaction:
|
Direct acquisition costs |
$25,000 |
|
Indirect acquisition costs |
30,000 |
|
Stock registration and issuance costs |
10,000 |
|
Total costs |
$65,000 |
The balance sheet of Smith Company, on the day of the acquisition, was as follows:
|
Smith Company |
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|
Assets |
Liabilities and Equity |
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|
Cash |
$100,000 |
Current liabilities |
$80,000 |
||
|
Inventory |
300,000 |
Bonds payable |
550,000 |
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|
Property, plant, and equipment: |
Stockholders’ equity: |
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|
Land |
$200,000 |
Common stock |
$200,000 |
||
|
Buildings (net) |
250,000 |
Paid in capital in excess of par |
100,000 |
||
|
Equipment (net) |
200,000 |
650,000 |
Retained earnings |
120,000 |
420,000 |
|
Total assets |
$1,050,000 |
Total liabilities and equity |
$1,050,000 |
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The appraised fair values as of July 1, 20X1, are as follows:
|
Inventory |
$250,000 |
|
Equipment |
220,000 |
|
Land |
180,000 |
|
Buildings |
300,000 |
|
Current liabilities |
140,000 |
|
Bonds payable |
410,000 |
Record the purchase of Smith Company on the books of Rogers Corporation.