Question

Arturo pays cash of $4,200,000 to acquire Westmont. No stock is issued and Arturo pays $42,000 for legal fees to complete the transaction. Prepare Arturo’s journal entry to record its acquisition of Westmont.

Answer 1

Answer:

Explanation:

The journal entries are shown below:

Inventory A/c Dr   $600,000

Land A/c Dr $990,000

Building A/c Dr $2,000,000

Customer relationship A/c Dr $800,000

         To Account payable A/c $80,000

         To Cash A/c $4,200,000

         To Gain on purchase A/c $110,000

(Being the acquisition is recorded)

Legal fees expense A/c or Professional service expense A/c Dr $42,000

         To Cash A/c $42,000

(Being the cash is paid)