Reference no: EM131817747
Question - Pretzel Company acquired the assets (except for cash) and assumed the liabilities of Salt Company on January 2, 2005. 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 Par Value Fair Value
Common $ 10 $ 25
Preferred 100 100
Immediately prior to the acquisition, Salt Company's balance sheet reported the following book values and fair values:
SALT COMPANY Balance Sheet January 2, 2005
Book Value Fair Value
Cash $ 165,000 $ 165,000
Accounts receivable (net of $11,000 allowance) 220,000 198,000
Inventory - LIFO cost 275,000 330,000
Land 396,000 550,000
Buildings and equipment (net) 1,144,000 1,144,000
Total assets $ 2,200,000
$ 2,387,000
Current liabilities $ 275,000 $ 275,000
Bonds Payable, 10% 450,000 495,000
Common stock, $5 par value 770,000
Other contributed capital 396,000
Retained earnings 219,000
Total liabilities and stockholders' equity $ 2,110,000
Required: Prepare the journal entry on the books of Pretzel Company to record the acquisition of the assets and assumption of the liabilities of Salt Company.
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