Pretzel Company acquired the assets and assumed the liabilities of Salt Company on January 2, 2017. As compensation, Pretzel Company gave 17,000 shares of its common stock, 13,000 shares of its 10% preferred stock, and cash of $26,000 to the stockholders of Salt Company. On the acquisition date, Pretzel Company stock had the following characteristics: Stock Par value Market value Common $10 $25 Preferred 90 90 Immediately prior to acquisition, Salt Company's balance sheet reported the following book values and fair values: Book value Fair value Cash and cash equivalents $ 66,000 $ 66,000 Accounts receivable (net of 11,000 allowance) 220,000 222,000 Inventory - LIFO cost 275,000 262,000 Land 396,000 450,000 Building and equipment - net 1,144,000 1,414,000 Franchises 165,000 Patent 0 273,000 Total assets $2,266,000 Current liabilities 275,000 275,000 Bonds payable, 10% 450,000 438,000 Common stock, $5 par 770,000 Additional paid-in capital 396,000 Retained earnings 375,000 Total liabilities and stockholders' equity $2,266,000 Pretgel Company will cancel the related franchise agreements. Therefore, the franchises bare no valor to Portal Company * The current liability of $275,000 includes liabilities that were recognized in the books under conventional GAAP, including ASC 450-20. During appraisals, it was determined that there were contingent losses of $180,000 that were not recognized because the likelihood that these losses will actually occur warme more like than mot instead of probable. The amount of loss was estimable. Required: Prepare the journal entry on the books of Pretzel Company to record the acquisition of the asset and assumption of liabilities of Salt Company. Show all your work in good order. Please note that you may be asked to defend your answer for the quiz at any time during the semester. If you are not in class when you are called to defend your answers, it will be presumed that you failed to defend all questions related to this quiz. Assume that Salt Company will cease to operate as a legal entity and will continue as an operating unit of Pretzel Company. Hint: Determine the fair value of the consideratione given and compare that amount with the fair value of identifiable net assets received You may debit accounts receivable by the total amount expected from customers. To report the account receivable at net realizable value (fair valuel, credit allowance for bag debt by the desired amount. If the fair value of debt is different from the carrying amount, recognize the difference as premium or discount on bonds payable. Remember that you need to record increases in common stock and preferred stock as well as payment of cash in relation to the transaction. 90 Pretzel Company acquired the assets and assumed the liabilities of Salt Company on January 2, 2017. As compensation, Pretzel Company gave 17,000 shares of its common stock, 13.000 shares of its 10% preferred stock, and cash of $26,000 to the stockholders of Salt Company. On the acquisition date, Pretzel Company stock had the following characteristics: Stock Par value Market value Common $10 $25 Preferred 90 Immediately prior to acquisition, Salt Company's balance sheet reported the following book values and fair values: Book value Fair value Cash and cash equivalents $ 66,000 $ 66,000 Accounts receivable (net of 11.000 allowance) 220,000 222,000 2 Inventory - LIFO cost 275,000 262,000 13 Land 396,000 450,000 54 Building and equipment - net 1,144,000 1,414,000 270 Franchises 165,000 0 165 Patent 273,000 273 Total assets $2,266,000 Current liabilities 275,000 275,000 Bonds payable, 10% 450,000 438,000 Common stock, $5 parlo 770,000 Additional paid-in capital 396,000 1541 Retained earnings 375,000 Total liabilities and stockholders' equity $2,266,000 Pregl Company will canal therlated franchise agrements. Therefore, the franchises have no reto Pro Company "The A b ability of $275,000 includes babies that we are in the books under contional GAAP, including ASC 450-20. During appraisal, it was determined that there are coming homes of $180,000 that of m i nd b e the likelihood that these fosse ill actually con was my more likely than nor instead of probable. The amount of loss was estimale Required: Prepare the journal entry on the books of Pretzel Company to record the quisition of the asset and assumption of liabilities of Salt Company. Show all your work in good order. Please note that you may be asked to defend your answer for the quiz at any time during the semester. If you are not in class when you are called to defend your answers, it will be presumed that you failed to defend all questions related to this quiz. Assume that Salt Company will cease to operate as a legal entity and will continue as an operating unit of Pretzel Company. Hinti Determine the fair value of the considerations given and compare that amount with the fair value of identifiable net assets received. You may debit accounts receivable by the total amount expected from customers. To report the account receivable at net realizable value (fair value), credit allowance for bad debt by the desired amount. If the fair value of debt 15 different from the carrying amount, recognize the difference as premium or discount on bonds payable. Remember that you need to record increases in common stock and preferred stock as well as payment of cash in relation to the transaction Pretzel Company acquired the assets and assumed the liabilities of Salt Company on January 2, 2017. As compensation, Pretzel Company gave 17,000 shares of its common stock, 13,000 shares of its 10% preferred stock, and cash of $26,000 to the stockholders of Salt Company. On the acquisition date, Pretzel Company stock had the following characteristics: Stock Par value Market value Common $10 $25 Preferred 90 90 Immediately prior to acquisition, Salt Company's balance sheet reported the following book values and fair values: Book value Fair value Cash and cash equivalents $ 66,000 $ 66,000 Accounts receivable (net of 11,000 allowance) 220,000 222,000 Inventory - LIFO cost 275,000 262,000 Land 396,000 450,000 Building and equipment - net 1,144,000 1,414,000 Franchises 165,000 Patent 0 273,000 Total assets $2,266,000 Current liabilities 275,000 275,000 Bonds payable, 10% 450,000 438,000 Common stock, $5 par 770,000 Additional paid-in capital 396,000 Retained earnings 375,000 Total liabilities and stockholders' equity $2,266,000 Pretgel Company will cancel the related franchise agreements. Therefore, the franchises bare no valor to Portal Company * The current liability of $275,000 includes liabilities that were recognized in the books under conventional GAAP, including ASC 450-20. During appraisals, it was determined that there were contingent losses of $180,000 that were not recognized because the likelihood that these losses will actually occur warme more like than mot instead of probable. The amount of loss was estimable. Required: Prepare the journal entry on the books of Pretzel Company to record the acquisition of the asset and assumption of liabilities of Salt Company. Show all your work in good order. Please note that you may be asked to defend your answer for the quiz at any time during the semester. If you are not in class when you are called to defend your answers, it will be presumed that you failed to defend all questions related to this quiz. Assume that Salt Company will cease to operate as a legal entity and will continue as an operating unit of Pretzel Company. Hint: Determine the fair value of the consideratione given and compare that amount with the fair value of identifiable net assets received You may debit accounts receivable by the total amount expected from customers. To report the account receivable at net realizable value (fair valuel, credit allowance for bag debt by the desired amount. If the fair value of debt is different from the carrying amount, recognize the difference as premium or discount on bonds payable. Remember that you need to record increases in common stock and preferred stock as well as payment of cash in relation to the transaction. 90 Pretzel Company acquired the assets and assumed the liabilities of Salt Company on January 2, 2017. As compensation, Pretzel Company gave 17,000 shares of its common stock, 13.000 shares of its 10% preferred stock, and cash of $26,000 to the stockholders of Salt Company. On the acquisition date, Pretzel Company stock had the following characteristics: Stock Par value Market value Common $10 $25 Preferred 90 Immediately prior to acquisition, Salt Company's balance sheet reported the following book values and fair values: Book value Fair value Cash and cash equivalents $ 66,000 $ 66,000 Accounts receivable (net of 11.000 allowance) 220,000 222,000 2 Inventory - LIFO cost 275,000 262,000 13 Land 396,000 450,000 54 Building and equipment - net 1,144,000 1,414,000 270 Franchises 165,000 0 165 Patent 273,000 273 Total assets $2,266,000 Current liabilities 275,000 275,000 Bonds payable, 10% 450,000 438,000 Common stock, $5 parlo 770,000 Additional paid-in capital 396,000 1541 Retained earnings 375,000 Total liabilities and stockholders' equity $2,266,000 Pregl Company will canal therlated franchise agrements. Therefore, the franchises have no reto Pro Company "The A b ability of $275,000 includes babies that we are in the books under contional GAAP, including ASC 450-20. During appraisal, it was determined that there are coming homes of $180,000 that of m i nd b e the likelihood that these fosse ill actually con was my more likely than nor instead of probable. The amount of loss was estimale Required: Prepare the journal entry on the books of Pretzel Company to record the quisition of the asset and assumption of liabilities of Salt Company. Show all your work in good order. Please note that you may be asked to defend your answer for the quiz at any time during the semester. If you are not in class when you are called to defend your answers, it will be presumed that you failed to defend all questions related to this quiz. Assume that Salt Company will cease to operate as a legal entity and will continue as an operating unit of Pretzel Company. Hinti Determine the fair value of the considerations given and compare that amount with the fair value of identifiable net assets received. You may debit accounts receivable by the total amount expected from customers. To report the account receivable at net realizable value (fair value), credit allowance for bad debt by the desired amount. If the fair value of debt 15 different from the carrying amount, recognize the difference as premium or discount on bonds payable. Remember that you need to record increases in common stock and preferred stock as well as payment of cash in relation to the transaction