Reference no: EM132920969

Diamond acquired Heart's net assets. At the time of the acquisition Heart's Balance sheet was as follows: Diamond paid 5000 acquisition costs and incurs £5,000 of security issuance costs.

Accounts Receivable £130,000
Inventory 70,000
Equipment, Net 50,000
Building, Net 250,000
Land 100,000
Total Assets. £600,000

Bonds Payable £100,000
Common Stock (5£ par) 50,000
Additional Paid in Capital 100,000
Retained Earnings 350,000
Total Liabilities and Stockholders' Equity £600,000

Fair values on the date of acquisition:

Inventory £100,000
Equipment 30,000
Building 350,000
Land 120,000
Brand Name 50,000
Bonds payable 120,000

Required:

Problem 1: Record the entry for the purchase of the net assets of Heart by Diamond at each of the following cases:
700,000 cash
300,000 cash

Diamond issued 25,000 shares of its £5 par value stock to acquire the net assets of Heart. The fair value of the stock at the acquisition date is £35 per share

Problem 2: Record the entry for the payment of the acquisition costs and security issuance costs.

Problem 3: Record the entry required by Heart for the sale of its net assets under each of the 3 cases independently.