Reference no: EM132508724

Big Corporation purchased the net assets of Small, Inc. on January 2, 2013 for $380,000 cash and also paid $15,000 in direct acquisition costs. Small, Inc. was dissolved on the date of the acquisition.

Small's balance sheet on January 2, 2013 was as follows:

Accounts receivable-net $90,000                            Current liabilities $75,000

Inventory 220,000                                                 Long term debt 80,000

Land 30,000                                                           Common stock ($1 par) 10,000

Building-net 20,000                                                  Addtl. paid-in capital 215,000

Equipment-net 40,000                                               Retained earnings 20,000

Total assets $400,000                                                Total liab. & equity $400,000

• Fair values agree with book values except for inventory, land, and equipment, which have fair values of $260,000, $35,000 and $35,000, respectively. Small has patent rights with a fair value of $20,000.

Required:

Question 1: Prepare Big's general journal entry for the cash purchase of Small's net assets.