Purchase of a Company
Hull Company purchased Heaston Company for $750,000 cash. A schedule of the market values of Heaston’s assets and liabilities as of the purchase date follows.
|
Heaston Company |
||
|
Schedule of Asset and Liability Market Values |
||
|
Assets |
|
|
|
Cash |
$ 5,000 |
|
|
Receivables |
78,000 |
|
|
Inventory |
136,000 |
|
|
Land, buildings, and equipment |
436,000 |
$655,000 |
|
Liabilities |
|
|
|
Current liabilities |
$ 80,000 |
|
|
Long term debt |
120,000 |
200,000 |
|
Net asset market value |
|
$455,000 |
1. Make the journal entry necessary for Hull Company to record the purchase.
2. Assume that the purchase price is $385,000 cash. Make the journal entry necessary to record the purchase.