Question

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22. The following book and fair values were available for Westmont Company as of March 1. Book Value $ 630,000 750,000 1,700,000 Fair Value $ 600,000 990,000 2,000,000 800,000 (80,000) -O- Inventory................ Land. .............. Buildings. ....... Customer relationships Accounts payable....... Common stock Additional paid-in capital. Retained earnings, 1/1........ Revenues..... Expenses .................................... (80,000) (2,000,000) (500,000) (360,000) (420,000) 280,000 Arturo Company pays $4,000,000 cash and issues 20,000 shares of its $2 par value common stock (fair value of $50 per share) for all of Westmont's common stock in a merger, after which West- mont will cease to exist as a separate entity. Stock issue costs amount to $25,000 and Arturo pays $42,000 for legal fees to complete the transaction. Prepare Arturo's journal entries to record its acquisition of Westmont.

Can someone show me what the excess-allocation schedule looks like for this problem? I know BV is 3 million, but how? Thanks

Answer 1

Excess allocation schedule:

Inventory	600,000
Land	990,000
Buildings	2,000,000
Customer relationships	800,000
Less: Accounts Payable	80,000
Book value	4,310,000
Fair value of stock issued	1000000
Cash	4,000,000
Good will on acquisition	690,000

No	Accounts	Debit	Credit
1	Inventory	600,000
	Land	990,000
	Buildings	2,000,000
	Customer relationships	800,000
	Goodwill	690,000
	Accounts Payable		80,000
	Common Stock		40,000
	Additional paid in capital		960000
	Cash		4,000,000
2	Legal fees	42,000
	Cash		42,000
3	Stock issue costs	25000
	Cash		25000