Question
Barstow Company is contemplating the acquistion of the net assets of Crown Company for $875,000 cash. To complete the transaction, acquisition costs are $15,000. The
Barstow Company is contemplating the acquistion of the net assets of Crown Company for $875,000 cash. To complete the transaction, acquisition costs are $15,000. The balance sheet of Crown Company on the purchase date is as follows:
Crown Company----Balance Sheet-------December 31, 2015
Assets Liabilities and Equity
Current Assets.................................................$80,000 Liabilities...............................................$100,000
Land.................................................................$70,000 Common Stock ($10 par)......................$100,000
Building...........................................................$450,000 Paid-in capital in excess of par............$150,000
Accumulated depreciation---building..............(200,000) Retained Earning..................................$250,000
Equipment.......................................................$300,000
Accumulated depreciation----equipment.........(100,000)
Total Assets....................................................$600,000 Total Liabilities and Equity................$600,000
The following fair values have been obtained for Crown's identifiable assets and liabilities:
Current Assets.........$85,000
Land.........................$90,000
Building..................$300,000
Equipment.............$275,000
Liabilities...............$102,000
1. Record the acquisition of the net assets of Crown Company on Barstow Company's Books.
2. Record the sale of the net assets on the books of Crown Company.
3. Record the acquisition of 100% of the common stock of Crown Company on Barstow's books. Crown Company will remain a sperate legal entity.
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