Asset Purchase, Cash, and Stock Pretzel Company acquired the assets (except for cash) and assumed the liabilities of Salt Company on January 2, 2005. As compensation, Pretzel Company gave 30,000 shares of its common stock, 15,000 shares of its 10% preferred stock, and cash of $50,000 to the stockholders of Salt Company. On the acquisition date, Pretzel Company stock had the following characteristics: LO4 PRETZEL COMPANY Stock Par Value Fair Value Common $ 10 $ 25 Preferred 100 100 Immediately prior to the acquisition, Salt Company’s balance sheet reported the following book values and fair values:
SALT COMPANY Balance Sheet January 2, 2005 Book Value Fair Value Cash $ 165,000 $ 165,000 Accounts Receivable (net of $11,000 allowance) 220,000 198,000 Inventory—LIFO Cost 275,000 330,000 Land 396,000 550,000 Buildings and Equipment (net) 1,144,000 1,144,000 Total Assets $2,200,000 $2,387,000 Current Liabilities $ 275,000 $ 275,000 Bonds Payable, 10% 450,000 495,000 Common Stock, $5 par value 770,000 Other Contributed Capital 396,000 Retained Earnings 219,000 Total Liabilities and Stockholders’ Equity $2,110,000 Required:
Prepare the journal entry on the books of Pretzel Company to record the acquisition of the assets and assumption of the liabilities of Salt Company.