Liberty Inc. acquired 100% of the voting common stock of Valance Inc. on January 1, 2018...
Liberty Inc. acquired 100% of the voting common stock of Valance Inc. on January 1, 2018 by issuing 4,000 shares of Liberty Inc. $40 par value common stock that had a fair value of $120 per share. Valance Inc. will dissolve after the acquisition. Liberty incurred $40,000 of legal and accounting fees; and paid $25,000 in stock issuance costs as a result of this acquisition. The book value and fair value of Valance’s accounts on that date (prior to creating the combination) along with the book value of Pace's accounts are shown below:
|
Liberty |
Valance |
Valance |
|
|
Book |
Book |
Fair |
|
|
Value |
Value |
Value |
|
|
Retained earnings, 1/1/18 |
$(250,000) |
$(240,000) |
|
|
Cash Receivables |
100,000 70,000 |
20,000 50,000 |
$20,000 50,000 |
|
Inventory |
230,000 |
170,000 |
210,000 |
|
Land |
280,000 |
220,000 |
240,000 |
|
Buildings (net) |
480,000 |
240,000 |
270,000 |
|
Equipment (net) |
120,000 |
90,000 |
90,000 |
|
Liabilities |
(650,000) |
(430,000) |
(420,000) |
|
Common stock |
(360,000) |
(80,000) |
|
|
Additional paid-in capital |
(20,000) |
(40,000) |
|
Prepare all of the journal entries Liberty Inc. must make to record the acquisition of
Valance Inc where Valance Inc. ceases to exist. SHOW ALL WORK NECESSARY IN
SUPPORT YOUR ANSWER.
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