Benz Company is contemplating the purchase of the net assets of Cardinal Company for $800,000 cash. To complete the transaction, direct acquisition costs are $15,000. The balance sheet of Cardinal Company on the purchase date is as follows:
Cardinal Company
Balance Sheet
December 31, 2001
Assets Liabilities and Equity
Current assets $80,000 Liabilities $100,000
Land 50,000 Common Stock ($10 par) 100,000
Building 450,000 Paid-in capital in excess of par 150,000
Accumulated Depreciation, building (200,000) Retained Earnings 230,000
Equipment 300,000
Accumulated Depreciation, equipment (100,000)
Total assets 580,000 Total liabilities and equity 580,000
The following fair values have been obtained for Cardinal's assets and liabilities:
Current assets $100,000
Land 75,000
Building 300,000
Equipment 275,000
Liabilities 102,000
Required:
1. Record the purchase of the net assets of Cardinal Company on Benz Company books.
2. Record the sale of the net assets on the books of Cardinal Company.
3. Record the purchase of 100% of the common stock of Cardinal Company on Benz's books.
Cardinal Company will remain a separate legal entity.