Question

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 entries to record its acquisition of Westmont.

Answer 1

Answer:

As follows:

Explanation:

For acquisition of Westmont Company.

Inventory dr. 600,000

Land dr. 990,000

Buildings dr. 2,000,000

Customer Relationships dr. 800,000

Goodwill dr. 690,000

Accounts Payable cr. 80,000

Common Stock cr. 40,000

Additional paid-up capital cr. 960,000

Cash cr. 4,000,000

For legal fees

Services Expense dr 42,000

Cash cr 42,000

For stock issuance

Additional Paid-In Capital dr 25,000

Cash cr 25,000