Acquisition and Eliminating Entries, Bargain Purchase

Publix Company acquired all of Sherman Companys common stock for $25,200,000 cash; fees paid to an outside firm to estimate the earning power of Sherman and the fair values of its properties amounted to $2,000,000, paid in cash. Book values of Shermans identifiable assets and liabilities approximated their fair values except as noted below:

	Book Value	Fair Value
Inventories	$1,500,000	$1,600,000
Land	100,000	200,000
Other plant assets, net	800,000	1,050,000
Long-term debt	400,000	370,000

Shermans equity accounts consisted of $20,000,000 capital stock and $5,000,000 retained earnings.

Required

a. Record Publixs acquisition entry.

Enter numerical answers using all zeros (do not abbreviate to thousands or millions).

Description		Debit	Credit
Investment in Sherman		Answer	Answer
AnswerCashGain on acquisitionInvestment in ShermanLong-term debtMerger expensesRetained earnings		Answer	Answer
AnswerCashGain on acquisitionInvestment in ShermanLong-term debtMerger expensesRetained earnings		Answer	Answer
Cash		Answer	Answer

b. Prepare the working paper eliminating entries necessary to prepare a consolidated balance sheet at the date of acquisition.

Enter numerical answers using all zeros (do not abbreviate to thousands or millions).

Ref.	Description		Debit	Credit
(E)	Capital stock		Answer	Answer
	AnswerCashGain on acquisitionInvestment in ShermanLong-term debtMerger expensesRetained earnings		Answer	Answer
	AnswerCashGain on acquisitionInvestment in ShermanLong-term debtMerger expensesRetained earnings		Answer	Answer
(R)	Inventories		Answer	Answer
	Land		Answer	Answer
	Other plant assets, net		Answer	Answer
	AnswerCashGain on acquisitionInvestment in ShermanLong-term debtMerger expensesRetained earnings		Answer	Answer
	AnswerCashGain on acquisitionInvestment in ShermanLong-term debtMerger expensesRetained earnings		Answer	Answer