Bargain Purchase
Using the data presented in E1-13, determine the amount Fortune Corporation would record as a gain on bargain purchase and prepare the journal entry Fortune would record at the time of the exchange if Fortune issued bonds with a par value of $580,000 and a fair value of $564,000 in completing the acquisition of Sorden.
E1-13:
|
Balance Sheet Item
|
Historical Cost
|
Fair Value
|
|
Cash & Receivables
|
$ 55,000
|
$ 50,000
|
|
Inventory
|
105,000
|
200,000
|
|
Land
|
60,000
|
100,000
|
|
Plant & Equipment
|
400,000
|
300,000
|
|
Less: Accumulated Depreciation
|
(150,000)
|
|
|
Goodwill
|
10,000
|
|
|
Total Assets
|
$480,000
|
$650,000
|
|
Accounts Payable
|
$ 50,000
|
$ 50,000
|
|
Common Stock
|
100,000
|
|
|
Additional Paid-In Capital
|
60,000
|
|
|
Retained Earnings
|
270,000
|
|
|
Total Liabilities & Equities
|
$480,000
|