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 |
–0– |
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 complete the transaction. Prepare Arturo’s journal entry to record its acquisition of Westmont;