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On 1/1/2021 Shack Co. purchased Mansion Co. for $5,000,000. The following is the balance sheet of Mansion Co on 1/1/2021: Cash $800,000 Receivables $960,000 Inventories

On 1/1/2021 Shack Co. purchased Mansion Co. for $5,000,000. The following is the balance sheet of Mansion Co on 1/1/2021:

Cash

$800,000

Receivables

$960,000

Inventories

$818,000

PPE, net

$1,000,000

Total Assets

$3,578,000

Accounts Payable

$600,000

Notes Payable

$500,000

Capital Stock

$1,000,000

Retained Earnings

$1478,000

Total Liabilities and OE

$3,578,000

The fair market values of Mansion Co.s assets and liabilities resemble their book values at the time of acquisition, with the following exceptions: the book value of Mansions inventories was overvalued by $18,000, and the book value of Mansions PPE was undervalued by $100,000. Further, the fair market value of Mansion Co.s trade name, which was internally developed, was $900,000.

______________________________

The journal entry Shack Co. will record when it purchases Mansion Co. will contain a....

Question 11 options:

credit to Accounts Payable for $650,000

no debit or credit to Accounts Payable

credit to Accounts Payable for $600,000

debit to Accounts Payable for $650,000

debit to Accounts Payable for $600,000

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