Asset Purchase, Cash
P Company acquired the assets and assumed the liabilities of S Company on January 1, 2010, for $510,000 when S Company”s balance sheet was as follows:
S COMPANY Balance Sheet January 1, 2010
|
Cash |
$ 96,000 |
|
Receivables |
55,200 |
|
Inventory |
110,400 |
|
Land |
169,200 |
|
Plant and equipment (net) |
466,800 |
|
Total |
$897,600 |
|
Accounts payable |
$ 44,400 |
|
Bonds payable, 10%, due 12/31/2015, Par |
480,000 |
|
Common stock, $2 par value |
120,000 |
|
Retained earnings |
253,200 |
|
Total |
$897,600 |
Fair values of S Company”s assets and liabilities were equal to their book values except for the following:
- Inventory has a fair value of $126,000.
- Land has a fair value of $198,000.
- The bonds pay interest semiannually on June 30 and December 31. The current yield rate on bonds of similar risk is 8%.
Required:
Prepare the journal entry on P Company”s books to record the acquisition of the assets and assumption of the liabilities of S Company.