Question

The following book and fair values were available for Westmont Company as of March 1.

Book Value Fair Value
Inventory $ 644,750 $ 609,000
Land 779,250 1,086,750
Buildings 1,770,000 2,138,250
Customer relationships 0 842,250
Accounts payable (102,000 ) (102,000 )
Common stock ( 2,000,000 )
Additional paid-in capital (500,000 )
Retained earnings 1/1 (424,500 )
Revenues (457,000 )
Expenses 289,500
Arturo Company pays $4,130,000 cash and issues 28,200 shares of its $2 par value common stock (fair value of $50 per share) for all of Westmont’s common stock in a merger, after which Westmont will cease to exist as a separate entity. Stock issue costs amount to $32,400 and Arturo pays $49,800 for legal fees to complete the transaction.
Prepare Arturo’s journal entry to record its acquisition of Westmont. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Answer 1

DR Inventory $609,000

Land $1,086,750

Buildings $2,138,250

Customer Relationships $842,250

Goodwill $965,750

CR Accounts Payable $102,000

Common Stock $56,400

Additional Paid-In Capital $1,353,600

Cash $4,130,000

Working

Common Stock = 28,200 shares * $2 = $56,400

Additional Paid in Cap = 28,200 shares * ( 50 - 2) = $1,353,600

DR Additional Paid-In Capital $32,400

CR Cash $32,400

DR Professional Services Expense $49,800

CR Cash $49,800