Question

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

	Book Value			Fair Value
Inventory	$	260,500		$	229,750
Land		759,000			1,069,500
Buildings		2,170,000			2,535,250
Customer relationships		0			825,000
Accounts payable		(119,000	)		(119,000	)
Common stock		(2,000,000	)
Additional paid-in capital		(500,000	)
Retained earnings 1/1		(413,000	)
Revenues		(480,000	)
Expenses		322,500

Arturo pays cash of $4,413,500 to acquire Westmont. No stock is issued and Arturo pays $47,100 for legal fees to complete the transaction.

Prepare Arturo’s journal entry to record its acquisition of Westmont. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

1. Record the acquisition of Westmont Company.

2. Record the legal fees related to the combination.

Answer 1

1
Inventory	229750
Land	1069500
Buildings	2535250
Customer Relationships	825000
Accounts Payable		119000
Cash		4413500
Gain on Bargain Purchase		127000
2
Professional Services Expense	47100
Cash		47100
Workings:
Inventory	229750
Land	1069500
Buildings	2535250
Customer Relationships	825000
Less: Accounts payable	-119000
Net assets	4540500
Less: Cash paid	-4413500
Gain on Bargain Purchase	127000