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The following book and fair values were available for Westmont Company as of March 1.
| Book Value | Fair Value | |||||
| Inventory | $ | 587,750 | $ | 555,250 | ||
| Land | 794,250 | 1,082,250 | ||||
| Buildings | 1,805,000 | 2,157,500 | ||||
| Customer relationships | 0 | 838,500 | ||||
| Accounts payable | (102,000) | (102,000) | ||||
| Common stock | (2,000,000) | |||||
| Additional paid-in capital | (500,000) | |||||
| Retained earnings 1/1 | (412,500) | |||||
| Revenues | (486,500) | |||||
| Expenses | 314,000 | |||||
Arturo Company pays $4,010,000 cash and issues 26,300 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 $25,600 and Arturo pays $44,700 for legal fees to complete the transaction.
Prepare Arturo’s journal entry to record its acquisition of Westmont. (If no entry is required for a transaction/event, select “No journal entry required” in the first account field.)
Transaction List:
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1 Record the acquisition of Westmont Company.
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2 Record the legal fees related to the combination.
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3 Record the payment of stock issuance costs.
The company is always prepared with financial statements to understand its earnings and performance. This is only possible when the transactions are documented in a systematic manner and journal entries are an effective method to record the financial transactions in a way that will affect two accounts at a time.
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