On January 1, 2010, Peach Company issued 1,500 of its $20 par value common shares with a fair value of $60 per share in exchange for the 2,000 outstanding common shares of Swartz Company in a purchase transaction. Registration costs amounted to $1,700, paid in cash. Just prior to the acquisition, the balance sheets of the two companies were as follows:
Peach Company Swartz Company
Cash $ 73,000 $ 13,000
Accounts receivable (net) 95,000 19,000
Inventory 58,000 25,000
Plant and equipment (net) 95,000 43,000
Land 26,000 22,000
Total assets $347,000 $122,000
Accounts payable $ 66,000 $ 18,000
Notes payable 82,000 21,000
Common stock, $20 par value 100,000 40,000
Other contributed capital 60,000 24,000
Retained earnings 39,000 19,000
Total equities $347,000 $122,000
Any difference between the book value of equity and the value implied by the purchase price relates to goodwill.
A. Prepare the journal entry on Peach Company's books to record the exchange of stock.
B. Prepare a Computation and Allocation Schedule for the difference between book value
and value implied by the purchase price.
C. Prepare a consolidated balance sheet at the date of acquisition.