Problem 1

ABC Corporation is considering the acquisition of XYZ Corporation and has obtained the following audited condensed balance sheet:

XYZ Corporation

Balance Sheet

December 31, 2016

Assets			Liabilities and Equity
Current assets	$ 50,000		Current Liabilities	$ 70,000
Land	30,000		Capital Stock (50,000
Buildings (net)	70,000		shares, $1 par value)	50,000
Equipment (net)	60,000		Other Paid-in Capital	20,000
			Retained Earnings	70,000
	$210,000			$210,000

Internet also acquired the following fair values for XYZ's assets and liabilities:

Current assets	$ 65,000
Land	50,000
Buildings (net)	80,000
Equipment (net)	85,000
Current Liabilities	(70,000)
	$210,000

ABC and XYZ agree on a price of $280,000 for XYZ's net assets. Prepare the necessary journal entry to record the purchase given the following scenarios:

a.	ABC pays cash for XYZ Corporation and incurs $7,000 of acquisition costs.
b.	ABC issues its $5 par value stock as consideration. The fair value of the stock at the acquisition date is $60 per share. Additionally, Internet incurs $7,000 of security issuance costs.

Problem 2

On January 1, 2016, Fred Corporation purchased the net assets of Dee Company for $1,700,000. On this date, a condensed balance sheet for Dee showed:

	Book	Fair
	Value	Value
Current Assets	$ 600,000	$850,000
Long-Term Investments in Securities	400,000	50,000
Land	100,000	620,000
Buildings (net)	600,000	800,000
	$1,700,000
Current Liabilities	$ 300,000	$200,000
Long-Term Debt	750,000	700,000
Common Stock (no-par)	300,000
Retained Earnings	350,000
	$1,700,000

Required:

Record the entry on Fred's books for the acquisition of Dee's net assets.

Problem 3

MNO acquired STW's net assets. At the time of the acquisition STW's Balance sheet was as follows:

Accounts Receivable	$140,000
Inventory	80,000
Equipment, Net	40,000
Building, Net	270,000
Land	150,000
Total Assets	$680,000
Bonds Payable	$100,000
Common Stock	50,000
Retained Earnings	450,000
Total Liabilities and Stockholders' Equity	$600,000

Fair values on the date of acquisition (book value and fair values are the same for accounts receivable):

Inventory	$110,000
Equipment	30,000
Building	370,000
Land	130,000
Brand Name	60,000
Bonds payable	120,000
Acquisition costs:	$ 7,000

Required:

Record the entry for the purchase of the net assets of STW at the following cash prices:

a.	$800,000
b.	$310,000