Asset acquisition vs. stock purchase (fair value equals book value) Assume that an investor purchases the business of an investee. The fair value of the investee company is equal to its reported book value and the fair values of the individual net assets are equal to their reported book values. The investee company reports the following balance sheet on the acquisition date:

Cash	$1,680	Accounts payable	$3,360
Accounts receivable	3,360	Accrued liabilities	5,040
Inventories	6,720		-
Current assets	11,760	Current liabilities	8,400
		Long-term liabilities	6,720
PPE, net	16,800	Stockholders equity	13,440
Total assets	$28,560	Total liabilities and equity	$28,560

Parts a. and b. are independent of each other.

a. Provide the journal entry if the investor pays cash and purchases the assets and assumes the liabilities of the investee company.

If no additional debit entries are required, select "No entry" as the answer.

General Journal
Description	Debit	Credit
Cash	Answer	Answer
Accounts receivable	Answer	Answer
Inventories	Answer	Answer
PPE, net	Answer	Answer
AnswerCashEquity investmentGoodwillInvestee's stockholder's equityNo entry	Answer	Answer
Accounts payable	Answer	Answer
Accrued liabilities	Answer	Answer
Long-term liabilities	Answer	Answer
AnswerCashEquity investmentGoodwillInvestee's stockholder's equityNo entry	Answer	Answer

b. Provide the journal entry if the investor pays cash and purchases all of the stock of the investees shareholders.

General Journal
Description	Debit	Credit
AnswerCashEquity investmentGoodwillInvestee's stockholder's equityNo entry	Answer	Answer
AnswerCashEquity investmentGoodwillInvestee's stockholder's equityNo entry	Answer	Answer