Asset acquisition vs. stock purchase (fair value differs book value) Assume an investor purchases the net assets of an investee for the cash purchase price is $75,600. The investor is willing to purchase the investee's business for this amount because the fair value of PPE is $70,560 and the fair value of a (previously unrecognized) customer list is $15,120 (the fair values of all other assets and liabilities are equal to their book values). The investee company reports the following balance sheet on the acquisition date: Cash $5,040 Accounts payable Accounts receivable 10,080 Accrued liabilities $10,080 15,120 Inventories 20,160 Current assets 35,280 Current liabilities Long-term liabilities 25,200 20,160 PPE, net 50,400 Stockholders' equity 40,320 Total assets $85,680 Total liabilities & equity $85,680 Parts a. and b. are independent of each other. a. Provide the journal entry if the investor purchases the assets and assumes the liabilities of the investee company. Description Debit Credit Cash Accounts receivable Inventories PPE, net Accounts payable Accrued liabilities Long-term liabilities b. Provide the journal entry if the investor purchases all of the stock of the investee's shareholders. Description Debit Credit