The following book and fair values were available for Westmont Company as of March 1. Book valueFair valueInventory$ 630,000$ 600,000Land750,000990,000Buildings1,700,0002,000,000Customer relationships–0–800,000Accounts payable(80,000)(80,000)Common stock(2,000,000) Additional paid-in capital(500,000) Retained earnings, 1/1(360,000) Revenues(420,000) Expenses280,000 Arturo Company pays $4,000,000 cash and issues 20,000 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 $25,000 and Arturo pays $42,000 for legal fees to complete the transaction. RequiredPrepare Arturo’s journal entries to record its acquisition of Westmont.

In case of recording acquision entries,fair value needs to be taken not book value.Differerence…

Answered: he following book and fair values were…

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter5: The Income Statement And The Statement Of Cash Flows

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Problem 11P: Net Income and Comprehensive Income At the beginning of 2019, JR Companys shareholders equity was as...

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

	Book value	Fair value
Inventory	$ 630,000	$ 600,000
Land	750,000	990,000
Buildings	1,700,000	2,000,000
Customer relationships	–0–	800,000
Accounts payable	(80,000)	(80,000)
Common stock	(2,000,000)
Additional paid-in capital	(500,000)
Retained earnings, 1/1	(360,000)
Revenues	(420,000)
Expenses	280,000

Arturo Company pays $4,000,000 cash and issues 20,000 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 $25,000 and Arturo pays $42,000 for legal fees to complete the transaction.

Required

Prepare Arturo’s journal entries to record its acquisition of Westmont.

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