Exercise 1: Asset Purchase v Stock Purchase
Frylock Inc. is thinking about undertaking vertical integration by taking over the functions performed by
one of their suppliers, Meat Wad Inc. Frylock can either buy the assets of, or 100% of the outstanding
stock of Meat Wad for $600,000 plus $10,000 in direct aquisition costs. Below is financial information
for Meat Wad as of 12/31/17:
Meat Wad, Inc.
Balance Sheet as of 12/31/17
Assets		Book	FMV		Liabilities		Book	FMV
Cash		$-	$-		A/P		$25,000	$25,000
A/R		150,000	125,000		Notes Payable		75,000	75,000
Inventory		175,000	200,000		Bonds Payable		150,000	150,000
Trademark		-	10,000
Net Fixed Assets		200,000	250,000		Equity		275,000
Total Assets		$525,000			Total Liabilities & O.E.		$525,000
A) Complete the journal entry made by Frylock to account for an asset purchase of Meat Wad on 12/31/17 by entering the required amounts into the gray shaded cells. When correct, the cells will change color:
Account				Debit			Credit
Accounts Receivable
Inventory
Trademark
Net Fixed Assets
Goodwill
Acquisition Expenses
	A/P
	Notes Payable
	Bonds Payable
	Cash
B) Complete the journal entry made by Meat Wad to account for the asset purchase by Frylock on 12/31/17 by entering the required amounts into the gray shaded cells. When correct, the cells will change color:
Account				Debit			Credit
Cash
A/P
Notes Payable
Bonds Payable
	A/R
	Inventory
	Net Fixed Assets
	Gain on Sale
C) Complete the journal entry made by Frylock to account for a 100% stock purchase of Meat Wad on 12/31/17 by entering the required amounts into the gray shaded cells. When correct, the cells will change color:
Account				Debit			Credit
Investment in Meat Wad
Acquisition Expenses
	Cash