Purchase of Net Assets Using Bonds On January 1, 2004, Perez Company acquired all the assets and assumed all the liabilities of Stalton Company and merged Stalton into Perez. In exchange for the net assets of Stalton, Perez gave its bonds payable with a maturity value of $600,000, a stated interest rate of 10%, interest payable semiannually on June 30 and December 31, a maturity date of January 1, 2014, and a yield rate of 12%.
Balance sheets for Perez and Stalton (as well as fair value data) on January 1, 2004, were as follows: LO4 Perez Stalton Book Value Book Value Fair Value Cash $250,000 $114,000 $114,000 Receivables 352,700 150,000 135,000 Inventories 848,300 232,000 310,000 Land 700,000 100,000 315,000 Buildings 950,000 410,000 54,900 Accumulated Depreciation—Buildings (325,000) (170,500)
Equipment 262,750 136,450 123,700 Accumulated Depreciation—Equipment (70,050) (90,450) (84,250)
Total Assets $2,968,700 $881,500 $968,350 Current Liabilities $292,700 $95,300 $95,300 Bonds Payable, 8% due 1/1/2013, Interest Payable 6/30 and 12/31 300,000 260,000 Common Stock, $15 par value 1,200,000 Common Stock, $5 par value 236,500 Other Contributed Capital 950,000 170,000 Retained Earnings 526,000 79,700 Total Equities $2,968,700 $881,500 Required:
Prepare the journal entry on the books of Perez Company to record the acquisition of Stalton Company’s assets and liabilities in exchange for the bonds.