Exercise 1: Asset Purchase of Another Company
CheapBeer Inc. wants to purchase the net assets of FancyBrew Inc. for purposes of horizontal
consolidation and will pay $500,000 cash for them. The balance sheet for FancyBrew Inc. on the date
of purchase is as follows:
FancyBrew Inc.
Balance Sheet as of 5/15/17
Assets				Liabilities & Owners' Equity
	Book Value	Fair Market Value			Book Value	Fair Market Value
Cash	$0	$0		A/P	$80,000	$80,000
A/R	50,000	50,000		Notes Payable	25,000	25,000
Inventory	125,000	100,000		Mortgage Payable	70,000	70,000
Net Fixed Assets	175,000	200,000		Total Liabilities:	$175,000
Patents	0	25,000
				Common Stock	75,000
				Retained Earnings	100,000
				Total Equity:	$175,000
Total Assets:	$350,000			Total Liabilities & O.E.:	$350,000
A) Prepare the journal entry amounts for this asset acquisition on the books of CheapBeer Inc by entering the proper dollar amounts in the gray-shaded cells. When correct, the cells will change color.
Account			Debits		Credits
A/R
Inventory
Net Fixed Assets
Patents
Goodwill
Cash
A/P
Notes Payable
Mortgage Payable
	Total
B) Prepare the journal entry amounts for this asset acquisition on the books of FancyBrew Inc. by entering the proper dollar amounts in the gray-shaded cells. When correct, the cells will change color.
Account			Debits		Credits
Cash
A/P
Notes Payable
Mortgage
A/R
Inventory
Net Fixed Assets
Gain on Sale of Net Assets
	Total