Question: Stock Purchase of Another Company
ChubbyGuy Inc. wants to purchase the outstanding stock of SkinnyGirl Inc. for purposes of horizontal consolidation and will pay $800,000 cash for it plus indirect acquisition costs of $50,000. The balance sheet for SkinnyGirl Inc. on the date of purchase is as follows:
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Skinny Girl Inc.Balance Sheet as of 7/31/17
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Assets
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Liabilities & Owners' Equity
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Book Value
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Fair Market Value
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Book Value
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Fair Market Value
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Cash
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$0
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$0
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A/P
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$30,000
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$30,000
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A/R
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125,000
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100,000
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Notes Payable
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75,000
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75,000
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Inventory
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75,000
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50,000
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Bonds Payable
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15,000
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10,000
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Net Fixed Assets
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300,000
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350,000
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Total Liabilities:
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$120,000
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Land
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25,000
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200,000
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Trademark
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15,000
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10,000
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Common Stock
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75,000
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Retained Earnings
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345,000
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Total Equity:
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$420,000
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Total Assets:
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$540,000
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Total Liabilities & O.E.:
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$540,000
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A) Prepare the journal entry amounts for this stock purchase on the books of ChubbyGuy Inc. by entering the proper dollar amounts in the gray-shaded cells. When correct, the cells will change color.