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Pretzel Company acquired the assets (except for cash) and assumed the liabilities of Salt Company on January 2, 2020. As

Pretzel Company acquired the assets (except for cash) and assumed the liabilities of Salt Company on January 2, 2020. As

Cornerstones of Financial Accounting
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
ChapterA2: Investments
Section: Chapter Questions
Problem 26E
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Pretzel Company acquired the assets (except for cash) and assumed the liabilities of Salt Company on January 2, 2020. 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 Stock Par Value Fair Value Common $ 10 $ 25 Preferred 100 100 Immediately prior to the acquisition, Salt Company's balance sheet reported the following book values and fair values: SALT COMPANY Balance SheetY January 2, 2020 Book value Fair value Cash 165,000 $ 165,000 Accounts receivable (net of $11,000 allowance) 220,000 198,000 Inventory-LIFO cost 275,000 330,000 Land 396,000 550,000 Buildings and equipment (net) 1,144,000 1,144,000 $ 2,200,000 $ 2,387,000 $ 275,000 $ Total assets Current liabilities 275,000 Bonds Payable, 10% Common stock, $5 par value 450,000 495,000 770,000 Other contributed capital Retained earnings 396,000 309,000 Total liabilities and $ 2,200,000 stockholders' equity 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. Page 1 of 1
Transcribed Image Text:Pretzel Company acquired the assets (except for cash) and assumed the liabilities of Salt Company on January 2, 2020. 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 Stock Par Value Fair Value Common $ 10 $ 25 Preferred 100 100 Immediately prior to the acquisition, Salt Company's balance sheet reported the following book values and fair values: SALT COMPANY Balance SheetY January 2, 2020 Book value Fair value Cash 165,000 $ 165,000 Accounts receivable (net of $11,000 allowance) 220,000 198,000 Inventory-LIFO cost 275,000 330,000 Land 396,000 550,000 Buildings and equipment (net) 1,144,000 1,144,000 $ 2,200,000 $ 2,387,000 $ 275,000 $ Total assets Current liabilities 275,000 Bonds Payable, 10% Common stock, $5 par value 450,000 495,000 770,000 Other contributed capital Retained earnings 396,000 309,000 Total liabilities and $ 2,200,000 stockholders' equity 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. Page 1 of 1
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