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
Merger expenses
Gain on acquisition
Cash

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
	Retained earnings
	Investment in Sherman
(R)	Inventories
	Land
	Other plant assets, net
	Long-term debt
	Investment in Sherman