Car Inc. wants to purchase the net assets of Paint Inc. for purposes of horizontal consolidation and will pay $750,000 cash for them. The balance sheet for Paint Inc. on the date of purchase is as follows:Assets Liabilities & Owners' Equity Book ValueFair Market Value Book ValueFair Market ValueCash$0$0 A/P$75,000$75,000A/R60,00050,000 Notes Payable25,00025,000Inventory75,00080,000 Mortgage Payable50,00050,000Net Fixed Assets150,000200,000 Total Liabilities:$150,000 Patents025,000 Common Stock50,000 Retained Earnings85,000 Total Equity:$135,000 Total Assets:$285,000 Total Liabilities & O.E.:$285,000 A) Prepare the journal entry amounts for this asset acquisition on the books of Car Inc. by entering the proper debit and credit amounts in the gray-shaded cells below.Account DebitsCreditsA/R Inventory Net Fixed Assets Patents Goodwill Cash A/P Notes Payable Mortgage Payable Total $0$0B) Prepare the journal entry amounts for this asset acquisition on the books of Paint Inc. by entering the proper debit and credit amounts in the gray-shaded cells below.Account DebitsCreditsCash A/P Notes Payable Mortgage Payable A/R Inventory Net Fixed Assets Gain on Sale of Net Assets Total $0$0

Journal entries (JE) refers to the original books of accounts and it records the daily transaction…

Answered: Car Inc. wants to purchase the net…

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

ChapterA2: Investments

Section: Chapter Questions

Problem 30E

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Car Inc. wants to purchase the net assets of Paint Inc. for purposes of horizontal consolidation and will pay $750,000 cash for them. The balance sheet for Paint Inc. on the date of purchase is as follows:

Assets		Liabilities & Owners' Equity
	Book Value	Fair Market Value			Book Value	Fair Market Value
Cash	$0	$0		A/P	$75,000	$75,000
A/R	60,000	50,000		Notes Payable	25,000	25,000
Inventory	75,000	80,000		Mortgage Payable	50,000	50,000
Net Fixed Assets	150,000	200,000		Total Liabilities:	$150,000
Patents	0	25,000
				Common Stock	50,000
				Retained Earnings	85,000
				Total Equity:	$135,000

Total Assets:	$285,000			Total Liabilities & O.E.:	$285,000

A) Prepare the journal entry amounts for this asset acquisition on the books of Car Inc. by entering the proper debit and credit amounts in the gray-shaded cells below.
Account			Debits	Credits
A/R
Inventory
Net Fixed Assets
Patents
Goodwill
Cash
A/P
Notes Payable
Mortgage Payable
	Total		$0	$0
B) Prepare the journal entry amounts for this asset acquisition on the books of Paint Inc. by entering the proper debit and credit amounts in the gray-shaded cells below.
Account			Debits	Credits
Cash
A/P
Notes Payable
Mortgage Payable
A/R
Inventory
Net Fixed Assets
Gain on Sale of Net Assets
	Total		$0	$0

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