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The following book and fair values were available for Westmont Company as of March 1
| The following book and fair values were available for Westmont Company as of March 1. |
| Book Value | Fair Value | |||||
| Inventory | $ | 494,000 | $ | 449,500 | ||
| Land | 763,500 | 1,060,500 | ||||
| Buildings | 1,975,000 | 2,303,500 | ||||
| Customer relationships | 0 | 859,500 | ||||
| Accounts payable | (118,000 | ) | (118,000 | ) | ||
| Common stock | (2,000,000 | ) | ||||
| Additional paid-in capital | (500,000 | ) | ||||
| Retained earnings 1/1 | (427,000 | ) | ||||
| Revenues | (486,000 | ) | ||||
| Expenses | 298,500 | |||||
|
Arturo pays cash of $4,420,000 to acquire Westmont. No stock is issued and Arturo pays $49,000 for legal fees to complete the transaction. |
Expert Solution
Date
Particular
Debit ($)
Credit ($)
Inventory a/c Dr
Land a/c Dr
Building a/c Dr
Customer relationships a/c Dr
To Accounts payable a/c
To Cash a/c
To Gain on Bargain purchase a/c
( To record acquisition of westmont company )
$449,500
$1,060,500
$2,303,500
$859,500
$118,000
$4,420,000
$135,000
Professional service expenses a/c Dr
To Cash a/c
( To record legal fees relating to the acquisition)
$49,000
$49,000
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