Bargain purchase with allocation. Carp Corporation is purchasing the net assets of Bass Company on December 31, 20X6, when Bass Company has the following balance sheet:
|
Assets |
Liabilities and Equity |
||
|
Current assets |
$100,000 |
Liabilities |
$90,000 |
|
Land |
50,000 |
Common stock ($10 par) |
200,000 |
|
Buildings (net) |
200,000 |
Retained earnings |
140,000 |
|
Equipment (net) |
60,000 |
||
|
Patents |
20,000 |
||
|
Total assets |
$430,000 |
Total liabilities and equity |
$430,000 |
Carp has obtained the following fair values for Bass Company accounts:
|
Current assets |
$120,000 |
|
Land |
80,000 |
|
Buildings |
250,000 |
|
Equipment |
150,000 |
|
Liabilities |
92,000 |
|
Patents |
20,000 |
Direct acquisition costs are $18,000, and indirect acquisition costs are $5,000.
Prepare the entries to record the purchase of Bass Company assuming the cash payment by Carp Corporation to Bass Company is $400,000. Carp Corporation will assume the liabilities of Bass Company. Zone analysis is recommended.