Purchase of a Company
Landers Inc. is considering purchasing J&B Properties, which has the following assets and liabilities.
|
|
Cost
|
Fair Market Value
|
|
Accounts receivable
|
$ 210,000
|
$ 200,000
|
|
Inventory
|
250,000
|
260,000
|
|
Prepaid insurance
|
12,000
|
12,000
|
|
Buildings and equipment (net)
|
88,000
|
168,000
|
|
Accounts payable
|
(130,000)
|
(130,000)
|
|
Net assets
|
$ 430,000
|
$ 510,000
|
1. Make the journal entry necessary for Landers Inc. to record the purchase if the purchase price is $650,000 cash.
2. Assume that the purchase price is $320,000 cash. Make the journal entry necessary to record the purchase.