Questions 2-1 and 2-3

EXERCBE 2-1 Asset Purchase La Preston Company acquired the assets (except for cash) and assumed the liabilities of Saville Company. Immediately prior to the acquisition, Saville Company's balance sheet was as follows: Book Value Fair Value Cash Receivables (net) Inventory Plant and equipment (net) Land s 130,000 120,000 192,000 360,000 480,000 420,000 228,000 396,000 540,000 660,000 $1.944,000 s 540,000 594,000 $1,572,000 $ Total assets Liabilities Common stck ($5 par value) Other contributed capital Retained ernings 480,000 32,000 20,000 $1,572,000 Total equities Required: Prepare the journal entries on the books of Preston Company to record the purchase of the assets and as- sumption of the liabilities of Saville Company if the amount paid was $1.560,000 in cash. A. B. Repeat the requirement in (A) assuming that the amount paid was $990,000