Bargain Purchase
Bower Company purchased Lark Corporation’s net assets on January 3, 20X2, for $625,000 cash. In addition, $5,000 of direct costs were incurred in consummating the combination. At the time of acquisition, Lark reported the following historical cost and current market data:
Balance Sheet Item | Book Value | Fair Value |
Cash and Receivables | $ 50,000 | $ 50,000 |
Inventory | 100,000 | 150,000 |
Buildings and Equipment (net) | 200,000 | 300,000 |
Patent | — | 200,000 |
Total Assets | $350,000 | $700,000 |
Accounts Payable | $ 30,000 | $ 30,000 |
Common Stock | 100,000 |
|
Additional Paid-In Capital | 80,000 |
|
Retained Earnings | 140,000 |
|
Total Liabilities and Equities | $350,000 |
|
Required
Give the journal entry or entries with which Bower recorded its acquisition of Lark’s net assets.
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