Diamond Acquired Heart's Net Assets Fair Values on the Date of Acquisition

question 27

Essay

Diamond acquired Heart's net assets. At the time of the acquisition Heart's Balance sheet was as follows:
$\begin{array}{lr}\text { Accounts Receivable } & \$ 130,000 \\\text { Inventory } & 70,000 \\\text { Equipment, Net } & 50,000 \\\text { Building, Net } & 250,000 \\\text { Land \& Building, Net } & 100,000 \\\text { Total Assets } & \$ 600,000 \\& \\\text { Bonds Payable } & \$ 100,000 \\\text { Common Stock } & 50,000 \\\text { Retained Earnings } & 450,000 \\\text { Total Liabilities and Stockholders' Equity } & \$ 600,000\end{array}$ Fair values on the date of acquisition:
$\begin{array}{lr}\text { Inventory } & \$ 100,000 \\\text { Equipment } & 30,000 \\\text { Building } & 350,000 \\\text { Land } & 120,000 \\\text { Brand name copyright } & 50,000 \\\text { Bonds payable } & 120,000 \\\text { Acqui sition costs: } & \$ 5,000\end{array}$ Required:
Record the entry for the purchase of the net assets of Heart by Diamond at the following cash prices:
a.
$700,000
b.
$300,000

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Definitions:

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