Question

On January 1, 16 Brown Inc. acquired Larson Company's net assets in exchange for Brown's common stock with a par value of $100,000 and a fair value of $800,000. Brown also paid $10,000 in direct acquisition costs and $15,000 in stock issuance costs.

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On this date, Larson's condensed account balances showed the following:

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​	Book Value	Fair Value
Current Assets	$280,000	$370,000
Plant and Equipment	440,000	480,000
Accumulated Depreciation	(100,000)	​
Intangibles – Patents	80,000	120,000
Current Liabilities	(140,000)	(140,000)
Long-Term Debt	(100,000)	(110,000)
Common Stock	(200,000)	​
Other Paid-in Capital	(120,000)	​
Retained Earnings	(140,000)	​

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Required:

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Prepare the journal entry to record Brown's purchase of Larson Company's net assets.

Answer 1

	Journal Entry
	Particulars				Debit	Credit
a)	Current Assets				$ 3,70,000.00
	Plant and Equipment				$ 4,80,000.00
	Intangibles – Patents				$ 1,20,000.00
	Intangibles - Goodwill			(bal.fig)	$    80,000.00
	To Current Liabilities					$ 1,40,000.00
	To Long-Term Debt					$ 1,10,000.00
	To Common Stock					$ 1,00,000.00
	Paid-in Capital in Excess of Par					$ 7,00,000.00
b)	Acquisition Expenses				$    25,000.00
	To Cash					$    25,000.00
	(Note: Here, Paid-in Capital in Excess of Par can also be debited
	for issue costs)