Required: A. Prepare the journal entries on the books of Preston Company to record the purchase of the assets and assumption of the liabilities of Saville Company if the amount paid was 1,560,000 in cash,chasc Pr B. Repeat the requirement in (A) assuming that the amount paid was $990,000. EXERCISE 2.2 Acquisition Method The balance sheets of Petrello Company and Sanchez Company as of January 1, 2011, are pre- sented below. On that date, after an extended period of negotiation, the two companies agreed to merge. To effect the merge Petrello Company is to exchange its unissued common stock for all the outstanding shares of Sanchez Company in the ratio of share of Petrello for each share of Sanchez. Karket valueslof the shares were agreed on as Petrello, $48 omonfien Sanchez, $24. The fair values of Sanchez Company's assets and liabiliies are equal to their book values with the exception of plant and equipment, which has an estimated fair value of $720,000 Petrello Sanche S $ 200,000 meger Cash Receivables Inventories Plant and equipment (net) 480,000 2,000,000 3,840,000 240,000no meve 240.0 800990 5 $6,800,000 $1,480,(i00 S 320,000 Total assets Liabilities Common stock, $16 par value Other contributed capital Retained earnings 3,440,000 400,000 1,760,000 $6,800,000 60,000 Total equities 480,000 Required: A. Prepare the journal entries on the books of Preston Company to record the purchase of the assets and assumption of the liabilities of Saville Company if the amount paid was 1,560,000 in cash,chasc Pr B. Repeat the requirement in (A) assuming that the amount paid was $990,000. EXERCISE 2.2 Acquisition Method The balance sheets of Petrello Company and Sanchez Company as of January 1, 2011, are pre- sented below. On that date, after an extended period of negotiation, the two companies agreed to merge. To effect the merge Petrello Company is to exchange its unissued common stock for all the outstanding shares of Sanchez Company in the ratio of share of Petrello for each share of Sanchez. Karket valueslof the shares were agreed on as Petrello, $48 omonfien Sanchez, $24. The fair values of Sanchez Company's assets and liabiliies are equal to their book values with the exception of plant and equipment, which has an estimated fair value of $720,000 Petrello Sanche S $ 200,000 meger Cash Receivables Inventories Plant and equipment (net) 480,000 2,000,000 3,840,000 240,000no meve 240.0 800990 5 $6,800,000 $1,480,(i00 S 320,000 Total assets Liabilities Common stock, $16 par value Other contributed capital Retained earnings 3,440,000 400,000 1,760,000 $6,800,000 60,000 Total equities 480,000