Reference no: EM132463955

The following are pre-acquisition financial balances for Paladium Corporation and Seminary Corporation as of December 31. Also included are fair values for Seminary Corporation accounts.

On December 31, Paladium acquires Seminary's outstanding stock by paying $380,000 in cash and issuing 10,000 shares of its own common stock with a fair value of $40 per share. Paladium paid legal and accounting fees of $30,000 as well as $5,000 in stock issuance costs.

		Paladium Book Values December 31		Seminary Book Values December 31		Seminary Fair Values December 31
		Debit	Credit	Debit	Credit	Debit	Credit
	Cash	420,000		120,000		120,000
	Receivables	220,000		300,000		280,000
	Inventory	410,000		210,000		200,000
	Land	600,000		130,000		190,000
	Building and equipment (net)	600,000		270,000		340,000
	Franchise agreements	220,000		190,000		240,000
	Accounts payable		300,000		120,000		160,000
	Accrued expenses		110,000		30,000		40,000
	Long-term liabilities		900,000		510,000		510,000
	Common stock - $20 par value		660,000
	Common stock - $5 par value				210,000
	Additional paid-in capital		70,000		90,000
	Retained earnings -Jan 1		390,000		240,000
	Revenues		980,000		330,000
	Expenses	940,000		310,000
	Totals	3.410,000	3,410,000	1,530,000	1,530,000

Question a. Record the investment by Paladium in Seminary using the Equity Method of Accounting.

Question b. Unrelated to part a above, treat the acquisition of Seminary by Paladium as a net asset acquisition where Paladium acquires the assets and assumes the liabilities with the payment of cash and the issue of its common stock. Make a journal entry on the books of Paladium to record the net asset acquisition.