Asset Purchase, Cash and Stock Pretzel Company acquired the assets (except for c

Question

Asset Purchase, Cash and Stock Pretzel Company acquired the assets (except for cash) and assumed the liabilities of Salt Com- pany on January 2,2012. As compensation, Pretzel Company gave 30,000 shares of its common stock, 15,000 shares of its 10% preferred stock, and cash of$50,000 to the stockholders of Salt Company. On the acquisition date, Pretzel Company stock had the following characteristics PRETZEL COMPANY Stock Common Preferred Par ValueFair s 10 100 s 25 100 Immediately prior to the acquisition, Salt Company's balance sheet reported the following book values and fair values SALT COMPANY Balance Sheet January 2, 2012 Book valweFair alur Accounts receivable (net of $11,000 allowance) Inventory-LIFO cost Land Buildings and equipment (net) Total assets Current liabilities Bonds Payable: 10% Common stock, $5 par value Other contributed capital Retained earnings Total liabilities and stockholders' equity 165,000 165,000 198,000 330,000 550,000 1,144,000 1,144,000 $2.200.0002 387.000 $275,000 275,000 220,000 396,000 450,000 770,000 495,000 09,000 8 @1

Explanation / Answer

JOURNAL ENTRY Accounts receivables 198000 Inventory 330000 Land 550000 Buildings and Equipment 1144000 Goodwill(Bal.figure) 848000 Cash 50000 Current liabilities 275000 Bonds payable 495000 Common stock(30000*10) 300000 Paid-in-capital in excess of par-Common stock(25-10)*30000 450000 Preferred stock (15000*100) 1500000 Total Purchase consideration Common stock(30000*10) 300000 Paid-in-capital in excess of par-Common stock(25-10)*30000 450000 Preferred stock (15000*100) 1500000 Cash 50000 Total 2300000 Net assets taken over: Accounts receivables 198000 Inventory 330000 Land 550000 Buildings and Equipment 1144000 Current liabilities -275000 Bonds payable -495000 1452000 Payment towards Goodwill 848000

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