Asset Purchase, Cash P Company acquired the assets and assumed the liabilities of SCompany on January 1, 2003, for $510,000 when S Company’s balance sheet was as follows: LO4 S COMPANY Balance Sheet January 1, 2003 Cash $96,000 Receivables 55,200 Inventory 110,400 Land 169,200 Plant and Equipment (net) 466,800 Total Assets $ 897,600 Accounts Payable $ 44,400 Bonds Payable, 10%, due 12/31/2008, par 480,000 Common Stock, $2 par value 120,000 Retained Earnings 253,200 Total Equities $ 897,600 Fair values of S Company’s assets and liabilities were equal to their book values except for the following: —
1. Inventory has a fair value of $126,000.
2. Land has a fair value of $198,000.
3. The bonds pay interest semiannually on June 30 and December 31. The current yield rate on bonds of similar risk is 8%.
Required:
Prepare the journal entry on P Company’s books to record the acquisition of the assets and assumption of the liabilities of S Company.