The following book and fair values were available for Westmont Company as of March 1.
| Book Value | Fair Value |
Inventory | $ 630,000 | $ 600,000 |
Land | 750,000 | 990,000 |
Buildings | 1,700,000 | 2,000,000 |
Customer relationships | –0– | 800,000 |
Accounts payable | (80,000) | (80,000) |
Common stock | (2,000,000) |
|
Additional paid-in capital | (500,000) |
|
Retained earnings 1/1 | (360,000) |
|
Revenues | (420,000) |
|
Expenses | 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 Westmont 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 entry to record its acquisition of Westmont.
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