PROBLEM:

Pietro Corporation acquired Suelo Corporation, on January 1, 2020, and has obtained the following audited condensed balance sheet. Pietro and Suelo agree on a Price of $300,000 for Suelos net assets and incurs $8,000 in acquisition costs.

Suelo Corporation

Balance Sheet

As December 31, 2019

Assets

Current assets $ 45,000

Land 50,000

Buildings (net) 70,000

Equipment (net) 50,000

Total assets $ 215,000

Liabilities and equity

Current liabilities $ 40,000

Capital stock (550,000 shares, $0.10 par value) 55,000

Additional paid-in capital 45,000

Retained earnings 75,000

Total Liabilities and Equity $ 215,000

Pietro also appraised at fair value the following fair values for Suelos assets and liabilities:

Current assets $ 50,000

Land 60,000

Buildings (net) 80,000

Equipment (net) 60,000

Current liabilities (50,000)

$ 200,000

REQUIRED

1. Prepare the necessary journal entry to record the purchase for cash. (10 points)

2. Assume than instead of cash, Pietro issues its 5,000, $1 par value common stock as consideration paid for Suelos. The fair value of the stock at the acquisition date is $60 per share. Additionally, Pietro incurs $8,000 of security issuance costs. Prepare the necessary journal entry to record the purchase using common stock as payment.

(10 points)