Accounting for the Acquisition of an Entire Company
James Company purchased Thomas Manufacturing for $1,000,000 cash on January 1.The book value and fair value of the assets of Thomas as of the date of the acquisition follow:
|
|
Book |
Fair |
|
|
Value |
Value |
|
Cash |
$ 10,000 |
$ 10,000 |
|
Accounts receivable |
100,000 |
100,000 |
|
Inventory |
200,000 |
300,000 |
|
Patent |
0 |
50,000 |
|
Property, plant, and equipment |
400,000 |
600,000 |
|
Totals |
$710,000 |
$1,060,000 |
In addition, Thomas had liabilities totaling $400,000 at the time of the acquisition. Thomas has no other separately identifiable intangible assets. Make the journal entry necessary on the books of James Company to record the acquisition.