Prepare the journal entry on P Company books

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Reference no: EM132833442

Question - Asset Purchase, Cash

P Company acquired the assets and assumed the liabilities of S Company on January 1, 2010, for $510,000 when S Company's balance sheet was as follows:

S COMPANY Balance Sheet January 1, 2010

Cash $96,000

Receivables 55,200

Inventory 110,400

Land 169,200

Plant and equipment (net) 466,800

Total $897,600

Accounts payable $44,400

Bonds payable, 10%, due 12/31/2015, Par 480,000

Common stock, $2 par value 120,000

Retained earnings 253,200

Total $897,600

Fair values of S Company's assets and liabilities were equal to their book values except for the following:

1. Inventory has a fair value of $126,000.

2. Land has a fair value of $198,000.

3. The bonds pay interest semi-annually on June 30 and December 31. The current yield rate on bonds of similar risk is 8%.

Required - Prepare the journal entry on P Company's books to record the acquisition of the assets and assumption of the liabilities of S Company.

Reference no: EM132833442

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