Asset Purchase, Cash
P Company acquired the assets and assumed the liabilities of S Company on January 1, 2010, for $510,000 when S Company"s balance sheet was as follows:
S COMPANY Balance Sheet January 1, 2010
|
Cash
|
$ 96,000
|
|
Receivables
|
55,200
|
|
Inventory
|
110,400
|
|
Land
|
169,200
|
|
Plant and equipment (net)
|
466,800
|
|
Total
|
$897,600
|
|
Accounts payable
|
$ 44,400
|
|
Bonds payable, 10%, due 12/31/2015, Par
|
480,000
|
|
Common stock, $2 par value
|
120,000
|
|
Retained earnings
|
253,200
|
|
Total
|
$897,600
|
Fair values of S Company"s assets and liabilities were equal to their book values except for the following:
- Inventory has a fair value of $126,000.
- Land has a fair value of $198,000.
- The bonds pay interest semiannually on June 30 and December 31. The current yield rate on bonds of similar risk is 8%.
Required:
Prepare the journal entry on P Company"s books to record the acquisition of the assets and assumption of the liabilities of S Company.