EXERCISE 3-4

The fair values of Sun Companys assets and liabilities are equal to their book values with the exception of land.

Required:

A. Prepare a journal entry to record the purchase of Sun Companys common stock. B. Prepare a consolidated balance sheet at the date of acquisition.

Purchase, Date of Acquisition LO 7 LO 8 LO 9 On January 1, 2018, Peach Company issued 1,500 of its $20 par value common shares with a fair value of $60 per share in exchange for the 2,000 outstanding common shares of Swartz Company in a purchase transaction. Registration costs amounted to $1,700, paid in cash. Just prior to the acqui- sition, the balance sheets of the two companies were as follows:

Cash Accounts receivable (net) Inventory Plant and equipment (net) Land

Peach Company

$ 73,000 95,000 58,000 95,000 26,000

Swartz Company

$ 13,000 19,000 25,000 43,000 22,000

Total assets

$347,000

$122,000

112

Chapter 3 Consolidated Financial StatementsDate of Acquisition

Accounts payable Notes payable Common stock, $20 par value Other contributed capital Retained earnings

Total equities

Peach Company

$ 66,000 82,000 100,000 60,000 39,000

$347,000

Swartz Company

$ 18,000 21,000 40,000 24,000 19,000

$122,000