F B C Caitlynburger Entertainment was acquired by RM Wino on May 16, 2016. After the close of Caitlynburger's books and the payment/distribution of cash the following balances remained: Accounts receivable Allowance for doubtful accounts Inventory Prepaid real estate taxes Supplies Property Plant & Equipment Accumulated depreciation - PP&E Patent Accounts payable Mortgage Note payable 980,000 32,000 1,550,000 38,000 32,000 3,750,000 865,000 176,000 735,000 2,712,000 17 19 RM Wino purchased all of the above assets and agreed to assume the liabilities of Caitlynburger Entertainment. Careful examination of Caitlynburger's books and assets revealed the following: 20 1 2 24 26 27 28 $12,000 of the supplies were deemed unusable The allowance account was insufficient - an aging analysis was performed and it was agreed that the allowance account should be increased by $42,000 and that $40,000 of the receivables were completely worthless. The parties agreed to a physical inventory with FIFO costs assigned to goods on hand. As a result it was determined that $57,000 of inventory was damaged to the extent of being worthless and the remaining inventory was valued properly valued The Property, Plant and Equipment was appraised at $4,970,000. Included in this category is real estate which had a fair value substantially greater than the book value. Accounts payable per Caitlynburger's books did not include payables of $38,000 which Caitlynburger acknowledged as valid claims. Caitlyn agreed that prior amortization of the Patent had been understated by $28,000 34 35 37 Caitlynburger agreed to sell the company to RM Wino in exchange for $1,160,000 in cash and a 4% note of $3,500,000 44 Instructions Prepare the entry to record the purchase of Caitlynburger Ent. on the books of RM Wino 46