Publix Corporation purchased the net assets (asset acquisition) of Sam’s Corporation on January 1, 2012 for $600,000 and also paid $10,000 in direct acquisition costs. Sam’s balance sheet on January 1, 2012 was as follows:
Book Value Book Value
AR -net $ 180,000 Current liabilities $ 70,000
Inventory 360,000 Long term debt 160,000
Land 40,000 Common stock ($1 par) 20,000
Building-net 60,000 APIC 430,000
Equipment-net 80,000 Retained earnings 40,000
Total assets $ 720,000 Total Liab. & Equity $ 720,000
NOTE 1: Fair values agree with book values except for inventory, land, and equipment. These three accounts had the following fair values:
Inventory Fair Value = $400,000
Land Fair Value = $50,000
Equipment Fair Value = $70,000
NOTE 2: Sam’s also has patent rights valued at $20,000.
Required:
Prepare Publix’s general journal entry for the cash purchase of Sam’s net assets. For full credit show all calculations (show your work).
Calculations:
Fair Value Gave Up $_____________________
Fair Value Received $_____________________
Difference $_____________________
Journal Entry(s):
Assume Publix Corporation purchased the net assets of Sam’s Corporation for $530,000 rather than $600,000. How would the difference be accounted for?