Question: Asset Purchase of Another Company
CheapBeer Inc. wants to purchase the net assets of FancyBrew Inc. for purposes of horizontal consolidation and will pay $500,000 cash for them. The balance sheet for FancyBrew Inc. on the date of purchase is as follows:
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FancyBrew Inc. Balance Sheet as of 5/15/17
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Assets
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Liabilities & Owners' Equity
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Book Value
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Fair Market Value
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Book Value
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Fair Market Value
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Cash
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$0
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$0
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A/P
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$80,000
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$80,000
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A/R
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50,000
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50,000
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Notes Payable
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25,000
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25,000
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Inventory
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125,000
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100,000
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Mortgage Payable
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70,000
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70,000
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Net Fixed Assets
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175,000
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200,000
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Total Liabilities:
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$175,000
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Patents
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0
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25,000
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Common Stock
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75,000
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Retained Earnings
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100,000
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Total Equity:
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$175,000
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Total Assets:
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$350,000
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Total Liabilities & O.E.:
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$350,000
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A) Prepare the journal entry amounts for this asset acquisition on the books of CheapBeer Inc by entering the proper dollar amounts in the gray-shaded cells. When correct, the cells will change color.
B) Prepare the journal entry amounts for this asset acquisition on the books of FancyBrew Inc. by entering the proper dollar amounts in the gray-shaded cells. When correct, the cells will change color.