Answer:
a.
PPE $35,280 (debit)
Customer List $7,560 (debit)
Cash $1,400 (debit)
Accounts receivable $2,800 (debit)
Inventories $5,600 (debit)
Accounts payable $ 2,800 (credit)
Accrued liabilities $ 4,200 (credit)
Long-term liabilities $ 5,600 (credit)
Gain on Bargain Purchase (Balancing figure) $2,240
Cash $37,800 (credit)
b.
Stockholders’ equity $ 11,200 (debit)
Revaluation Reserve ( $21,280 + $7,560) $28,840 (debit)
Gain on Bargain Purchase (Balancing figure) $2,240
Investment $37,800 (credit)
Explanation:
The Excess of the Purchase Price (Consideration) over the Net Assets taken over is known as the Goodwill.
Whilst Excess of Net Assets taken over against the Purchase Price (Consideration) is known as a Gain on Bargain Purchase.
In this question we have a gain on bargain purchase.
Note that acquisitions happens at Fair Values not Book Values of Investee.
