Question 2 (50 points). On January 1, 2021, Party Corporation acquired Surprise Corporation's net assets by paying 175,000 cash. Balance sheet data for the Party & Surprise and fair value information for Surprise immediately before the business combination are given below:

Party Surprise

Assets Book Value Book Value Fair Value

Cash & receivables 250,000 35,000 35,000

Inventory 100,000 58,300 65,000

Land 75,000 33,500 35,700

Plant, Property and Equipment 250,000 120,000 110,000

Less: Accumulated Depreciation -95,000 -36,800

Total 58 0,00 0 21 0,00 0 24 5,70 0

Liabilities and Stockholders' Equity

Accounts Payable 72,000 35,000 37,500

Notes Payable 125,000 13,000 13,000

Bonds payable 100,000 35,000 35,000

Common Stock 60,000 30,000

Additional Paid-in Capital 125,000 45,000

Retained Earnings 98,000 52,000

Total 58 0,00 0 21 0,00 0

Required:

a. Prepare the journal entry to record the acquisition of Surprise Corporation. (35 points).

b. What would the balance of inventory be in the balanced sheet of combined company immediately after the combination? (5 points).

c. What would the balance of accounts payable be in the balanced sheet of combined company immediately after the combination? (5 points).

d. What would the balance of common stock be in the balanced sheet of combined company immediately after the combination? (5 points).