Exercise 1B: Stock Purchase of Another Company
CheapBeer Inc. wants to purchase the net assets of FancyBrew Inc. for purposes of horizontal consolidation and will pay $750,000 cash for them. The balance sheet for FancyBrew Inc. on the date of purchase is as follows:
FancyBrew Inc.
Balance Sheet as of 7/1/20X1
Assets				Liabilities & Owners' Equity
	Book Value	Fair Market Value			Book Value	Fair Market Value
Cash	$0	$0		A/P	$75,000	$75,000
A/R	60,000	50,000		Notes Payable	25,000	25,000
Inventory	75,000	80,000		Mortgage Payable	50,000	50,000
Net Fixed Assets	150,000	200,000		Total Liabilities:	$150,000
Patents	0	25,000
				Common Stock	50,000
				Retained Earnings	85,000
				Total Equity:	$135,000
Total Assets:	$285,000			Total Liabilities & O.E.:	$285,000
A) Prepare the journal entry amounts for this stock purchase on the books of CheapBeer Inc. by entering the proper debit and credit amounts in the gray-shaded cells below.
Account			Debits		Credits
Investment in FancyBrew Inc.
Cash
	Total		$0		$0
B) Note: There is NO journal entry made on the part of the acquired company as stock is purchased
from the shareholders, and NOT the acquired company!