Acquisition Using Debentures
Fortune Corporation used debentures with a par value of $625,000 to acquire 100 percent of Sorden Company’s net assets on January 1, 20X2. On that date, the fair value of the bonds issued by Fortune was $608,000. The following balance sheet data were reported by Sorden:
Balance Sheet Item | Historical Cost | Fair Value |
Cash and Receivables | $ 55,000 | $ 50,000 |
Inventory | 105,000 | 200,000 |
Land | 60,000 | 100,000 |
Plant and Equipment | 400,000 | 300,000 |
Less: Accumulated Depreciation | (150,000) |
|
Goodwill | 10,000 |
|
Total Assets | $480,000 | $650,000 |
Accounts Payable | $ 50,000 | $ 50,000 |
Common Stock | 100,000 |
|
Additional Paid-In Capital | 60,000 |
|
Retained Earnings | 270,000 |
|
Total Liabilities and Equities | $480,000 |
|
Required
Give the journal entry that Fortune recorded at the time of exchange.
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