Question
1. The following book and fair values were available for Honeycutt Industries: Account Book Value Fair Value...
1. The following book and fair values were available for Honeycutt Industries:
|
Account |
Book Value |
Fair Value |
|
Inventory |
$630,000 |
500,000 |
|
Land |
$750,000 |
790,000 |
|
Buildings |
$1,700,000 |
1,900,000 |
|
Customer Relationships |
0 |
500,000 |
|
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 |
Flagg Inc. pays $3,000,000 cash and issues 10,000 shares of its $3 par value common stock (fair value of $50 per share) for all of Honeycutt’s common stock in a merger, after which Honeycutt Industries will cease to exist as a separate entity. Stock issue costs amount to $15,000 and Flagg pays $32,000 for legal fees to complete the transaction.
Required:
Prepare Flagg’s journal entries to record the acquisition of Honeycutt Industries.
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