Liberty Inc. acquired 100% of the voting common stock of Valance Inc. on January 1, 2018...

4.4 Ratings (749 Votes)

Fair value of net assets
Cash	$ 20,000
Receivables	$ 50,000
Inventory	$ 210,000
Land	$ 240,000
Buildings	$ 270,000
Equipment	$ 90,000
Total fair value of assets	$ 880,000
Less: Liabilities	$ 420,000
Fair value of net assets	$ 460,000

Paid in capital (4000*120)	$ 480,000
Less: Fair value of net assets	$ (460,000)
Add: legal and accounting fees	$ 40,000
Add: stock issuance costs	$ 25,000
Value of goodwill	$ 85,000

Cash paid for legal and accounting fees	$ 40,000
Cash paid for stock issuance costs	$ 25,000
Total cash paid	$ 65,000
Less: cash received	$ 20,000
Net cash paid (credited)	$ 45,000

Date	Account title and explanation	Debit	Credit
January 1, 2018	Receivables	$ 50,000
	Inventory	$ 210,000
	Land	$ 240,000
	Buildings	$ 270,000
	Equipment	$ 90,000
	Goodwill	$ 85,000
	Liabilities		$ 420,000
	Common stock (4000*40)		$ 160,000
	Additional paid-in capital (4000*(120-40))		$ 320,000
	Cash		$ 45,000
	To record the acquisition of Valance Inc.

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