Preston Company acquired the assets (except for cash) and assumed the liabilities of Saville Company. Immediately prior to the acquisition, Saville Company’s balance sheet was as follows: Book Value Fair ValueCash $122,900 $122,900Receivables (net) 207,560 232,240Inventory 361,510 389,840Plant and equipment (net) 459,200 573,420Land 417,050 617,650 Total assets $1,568,220 $1,936,050 Current Liabilities $526,250 $596,650Common stock ($5 par value) 477,680 Other contributed capital 126,920 Retained earnings 437,370 Total equities $1,568,220 (a)Prepare the journal entries on the books of Preston Company to record the purchase of the assets and assumption of the liabilities of Saville Company if the amount paid was $1,567,060 in cash. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.)Account Titles and ExplanationDebitCredit Cash Common Stock Gain on Business Combination Goodwill Inventory Land Liabilities Loss on Business Combination No Entry Other Contributed Capital Plant and Equipment Receivables Retained Earnings Cash Common Stock Gain on Business Combination Goodwill Inventory Land Liabilities Loss on Business Combination No Entry Other Contributed Capital Plant and Equipment Receivables Retained Earnings Cash Common Stock Gain on Business Combination Goodwill Inventory Land Liabilities Loss on Business Combination No Entry Other Contributed Capital Plant and Equipment Receivables Retained Earnings Cash Common Stock Gain on Business Combination Goodwill Inventory Land Liabilities Loss on Business Combination No Entry Other Contributed Capital Plant and Equipment Receivables Retained Earnings Cash Common Stock Gain on Business Combination Goodwill Inventory Land Liabilities Loss on Business Combination No Entry Other Contributed Capital Plant and Equipment Receivables Retained Earnings Cash Common Stock Gain on Business Combination Goodwill Inventory Land Liabilities Loss on Business Combination No Entry Other Contributed Capital Plant and Equipment Receivables Retained Earnings Cash Common Stock Gain on Business Combination Goodwill Inventory Land Liabilities Loss on Business Combination No Entry Other Contributed Capital Plant and Equipment Receivables Retained Earnings

Workings: 1.) Price paid for acquisition $1,567,060 Less: Fair value of net assets Fair…

Answered: Preston Company acquired the assets…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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(a)

Prepare the journal entries on the books of Preston Company to record the purchase of the assets and assumption of the liabilities of Saville Company if the amount paid was $1,567,060 in cash. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

Account Titles and Explanation	Debit	Credit
Cash Common Stock Gain on Business Combination Goodwill Inventory Land Liabilities Loss on Business Combination No Entry Other Contributed Capital Plant and Equipment Receivables Retained Earnings
Cash Common Stock Gain on Business Combination Goodwill Inventory Land Liabilities Loss on Business Combination No Entry Other Contributed Capital Plant and Equipment Receivables Retained Earnings
Cash Common Stock Gain on Business Combination Goodwill Inventory Land Liabilities Loss on Business Combination No Entry Other Contributed Capital Plant and Equipment Receivables Retained Earnings
Cash Common Stock Gain on Business Combination Goodwill Inventory Land Liabilities Loss on Business Combination No Entry Other Contributed Capital Plant and Equipment Receivables Retained Earnings
Cash Common Stock Gain on Business Combination Goodwill Inventory Land Liabilities Loss on Business Combination No Entry Other Contributed Capital Plant and Equipment Receivables Retained Earnings
Cash Common Stock Gain on Business Combination Goodwill Inventory Land Liabilities Loss on Business Combination No Entry Other Contributed Capital Plant and Equipment Receivables Retained Earnings
Cash Common Stock Gain on Business Combination Goodwill Inventory Land Liabilities Loss on Business Combination No Entry Other Contributed Capital Plant and Equipment Receivables Retained Earnings

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