Question

Exercise 2-12A Patel Company issued 106,200 shares of $1 par value common stock market value of $6/share) for the net assets of Seely Company on January 1, 2014, in a statutory merger. Seely Company had the following assets, liabilities, and owners' equity at that time: Cash Accounts receivable Inventory (LIFO) Land Plant assets (net) Total assets Book Value Tax Basis $21,450 110,180 81,660 29,630 359,900 $602,820 Fair Value $21,450 110,180 134,850 55,170 428,940 $750,590 Difference $-0- -0- 53,190 25,540 69,040 $9,640 53,490 172,310 $-0- -0- (18,390) Allowance for uncollectible accounts Accounts payable Bonds payable Common stock, $1 par value Other contributed capital Retained earnings Total equities $9,640 53,490 190,700 73,430 121,190 154,370 $602,820 Prepare the journal entry to record the assets acquired and liabilities assumed. Assume an income tax rate of 30%. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit

Patel Company issued 106,200 shares of $1 par value common stock (market value of $6/share) for the net assets of Seely Company on January 1, 2014, in a statutory merger. Seely Company had the following assets, liabilities, and owners’ equity at that time: Book Value Tax Basis Fair Value Difference Cash $21,450 $21,450 $—0— Accounts receivable 110,180 110,180 —0— Inventory (LIFO) 81,660 134,850 53,190 Land 29,630 55,170 25,540 Plant assets (net) 359,900 428,940 69,040 Total assets $602,820 $750,590 Allowance for uncollectible accounts $9,640 $9,640 $—0— Accounts payable 53,490 53,490 —0— Bonds payable 190,700 172,310 (18,390) Common stock, $1 par value 73,430 Other contributed capital 121,190 Retained earnings 154,370 Total equities $602,820 Prepare the journal entry to record the assets acquired and liabilities assumed. Assume an income tax rate of 30%.

Answer 1

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Naming convention is not available, can be slightly different per question format. Solution: Debit Credit 21450 110180 134850 55170 428940 Account title and explanation Cash Receivable Inventory Land Plant assets (net) Goodwill (plug) Allowance for uncollectible accounts Accounts Payable Bonds payable Common Stock (106200*1) Paid-in-Capital in excess of par - Common stock (106200*5) (To record the purchase of business) 122050 9640 53490 172310 106200 5310001