Pretzel Company acquired the assets (except for cash) and assumed the liabilities of Salt Com- pany on January 2, 2012. As compensation, Pretzel Company gave 30,000 shares of its common stock, 15,000 shares of its 10% preferred stock, and cash of $50,000 to the stockholders of Salt Company. On the acquisition date, Pretzel Company stock had the following characteristics: PRETZEL COMPANY Par Value Stock Common Preferred Immediately prior to the acquisition, Salt Company's balance sheet reported the following book values and fair values: SALT COMPANY Balance Sheet January 2, 2012 Cash Accounts receivable (net of $11,000 allowance) Inventory-LIFO cost $ 10 100 Land Buildings and equipment (net) Total assets Current liabilities Bonds Payable, 10% Common stock, $5 par value Other contributed capital Retained earnings Total liabilities and stockholders' equity Book value $ 165,000 220,000 275,000 396,000 1,144,000 $2,200,000 Fair Value $ 25 100 $ 275,000 450,000 770,000 396,000 309,000 $2,200,000 Fair value $ 165,000 198,000 330,000 550,000 1,144,000 $2,387,000 $ 275,000 495,000 Required: Prepare the journal entry on the books of Pretzel Company to record the acquisition of the assets and assumption of the liabilities of Salt Company.

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EXERCISE 2-3
Asset Purchase, Cash and Stock L06
Pretzel Company acquired the assets (except for cash) and assumed the liabilities of Salt Com-
pany on January 2, 2012. As compensation, Pretzel Company gave 30,000 shares of its common
stock, 15,000 shares of its 10% preferred stock, and cash of $50,000 to the stockholders of Salt
Company. On the acquisition date, Pretzel Company stock had the following characteristics:
PRETZEL COMPANY
Par Value
Stock
Common
Preferred
$10
100
Immediately prior to the acquisition, Salt Company's balance sheet reported the following
book values and fair values:
SALT COMPANY
Balance Sheet
January 2, 2012
Cash
Accounts receivable (net of $11,000 allowance)
Inventory LIF cost
Land
Buildings and equipment (net)
Total assets
Current liabilities
Bonds Payable, 10%
Common stock, $5 par value
Other contributed capital
Retained earnings
Total liabilities and stockholders' equity
Book value
$ 165,000
220,000
275,000
396,000
1,144,000
$2,200,000
Fair Value
$ 25
100
$275,000
450,000
770,000
396,000
309,000
$2,200,000
Fair value
$ 165,000
198,000
330,000
550,000
1,144,000
$2,387,000
$ 275,000
495,000
Required:
Prepare the journal entry on the books of Pretzel Company to record the acquisition of the
assets and assumption of the liabilities of Salt Company.
Transcribed Image Text:EXERCISE 2-3 Asset Purchase, Cash and Stock L06 Pretzel Company acquired the assets (except for cash) and assumed the liabilities of Salt Com- pany on January 2, 2012. As compensation, Pretzel Company gave 30,000 shares of its common stock, 15,000 shares of its 10% preferred stock, and cash of $50,000 to the stockholders of Salt Company. On the acquisition date, Pretzel Company stock had the following characteristics: PRETZEL COMPANY Par Value Stock Common Preferred $10 100 Immediately prior to the acquisition, Salt Company's balance sheet reported the following book values and fair values: SALT COMPANY Balance Sheet January 2, 2012 Cash Accounts receivable (net of $11,000 allowance) Inventory LIF cost Land Buildings and equipment (net) Total assets Current liabilities Bonds Payable, 10% Common stock, $5 par value Other contributed capital Retained earnings Total liabilities and stockholders' equity Book value $ 165,000 220,000 275,000 396,000 1,144,000 $2,200,000 Fair Value $ 25 100 $275,000 450,000 770,000 396,000 309,000 $2,200,000 Fair value $ 165,000 198,000 330,000 550,000 1,144,000 $2,387,000 $ 275,000 495,000 Required: Prepare the journal entry on the books of Pretzel Company to record the acquisition of the assets and assumption of the liabilities of Salt Company.
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