Question

Arturo company pays $4,130,000 cash and issues 28,200 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 $32,400 and arturo pays $49,800 for legal fees to complete the transaction.

Answer 1

Answer:

investment on Westment  4,212,200 debit

                       Cash                   4,212,200 credit

Explanation:

For the investment, we should include all the cost necessary to acquire the shares:

Total cost:

stocks issued cost                     32,400

legal fees                                    49,800

cash to acquire the shares    4,130,000  

     TOTAL                               4,212,200

We will create the investment account for this total and credit the cash