P2-14 The following book and fair values were available for Westmont Company as of March 1.
|
Book Value |
Fair Value |
|
|
Inventory |
630,000 |
600,000 |
|
Land |
750,000 |
990,000 |
|
Buildings |
1,700,000 |
2,000,000 |
|
Customer relationships – |
800,000 |
|
|
Accounts Payable |
(80,000) |
(80,000) |
|
Common stock |
(2,000,000) |
|
|
Additional paid-in capital |
(500,000) |
|
|
Retained earnings 1/1 |
(360,000) |
|
|
Revenues |
(420,000) |
|
|
Expenses |
280,000 |
Arturo Company pays $4,000,000 cash and issues 20,000 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 $25,000 and Arturo pays $42,000 for legal fees to compete the transaction.