Reference no: EM133000442

Question - 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 -

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.

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

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