1. The following book and fair values were available for Honeycutt Industries: Account Book Value Fair Value Inventory $630,000 500,000 Land $750,000 790,000 Buildings $1,700,000
1. The following book and fair values were available for Honeycutt Industries:
Account | Book Value | Fair Value |
|
|
|
Inventory | $630,000 | 500,000 |
Land | $750,000 | 790,000 |
Buildings | $1,700,000 | 1,900,000 |
Customer Relationships | 0 | 500,000 |
Accounts Payable | ($80,000) | (80,000) |
Common Stock | ($2,000,000 |
|
Additional Paid in Capital | ($500,000) |
|
Retained Earnings, 1/1 | ($360,000) |
|
Revenues | ($420,000) |
|
Expenses | $280,000 |
|
Flagg Inc. pays $3,000,000 cash and issues 10,000 shares of its $3 par value common stock (fair value of $50 per share) for all of Honeycutts common stock in a merger, after which Honeycutt Industries will cease to exist as a separate entity. Stock issue costs amount to $15,000 and Flagg pays $32,000 for legal fees to complete the transaction.
Required:
Prepare Flaggs journal entries to record the acquisition of Honeycutt Industries.
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