Exercise 2: Stock Purchase of Another Company
ChubbyGuy Inc. wants to purchase the outstanding stock of SkinnyGirl Inc. for purposes of horizontal
consolidation and will pay $800,000 cash for it plus indirect acquisition costs of $50,000. The
balance sheet for SkinnyGirl Inc. on the date of purchase is as follows:
Skinny Girl Inc.
Balance Sheet as of 7/31/17
Assets				Liabilities & Owners' Equity
	Book Value	Fair Market Value			Book Value	Fair Market Value
Cash	$0	$0		A/P	$30,000	$30,000
A/R	125,000	100,000		Notes Payable	75,000	75,000
Inventory	75,000	50,000		Bonds Payable	15,000	10,000
Net Fixed Assets	300,000	350,000		Total Liabilities:	$120,000
Land	25,000	200,000
Trademark	15,000	10,000		Common Stock	75,000
				Retained Earnings	345,000
				Total Equity:	$420,000
Total Assets:	$540,000			Total Liabilities & O.E.:	$540,000
A) Prepare the journal entry amounts for this stock purchase on the books of ChubbyGuy Inc. by entering the proper dollar amounts in the gray-shaded cells. When correct, the cells will change color.
Account			Debits		Credits
Investment in Skinny Girl Inc.
Indirect Acquisition Expenses
Cash
	Total
Note: There is NO journal entry made on the part of the aquired company as stock is purchased
from the shareholders, and NOT the acquired company!