Question - Asset acquisition vs. stock purchase (fair value is greater than book value)
Assume the investor purchases the same assets in #24, but now assume that the cash purchase price is $21,000. The investor is willing to purchase the investee's business for $21,000 because it appraises its PPE, net at $19,600, and because it values the investee's customer list at $4,200 (the fair values of all other assets and liabilities are equal to their book values).
Parts a. and b. are independent of each other.
a. Provide the journal entry if the investor purchases the assets and assumes the liabilities of the investee company.
b. Provide the journal entry if the investor purchases all of the stock of the investee's shareholders.