Saveed Corporation purchased the net assets of Penny Inc. on January 2, 2013 for $1,690,000 cash and also paid $15,000 in direct acquisition costs. Penny dissolved as of the date of the acquisition. Penny's balance sheet on January 2, 2013 was as follows:
Fair values agree with book values except for inventory, land, and equipment, which have fair values of $640,000, $140,000 and $230,000, respectively. Penny has customer contracts valued at $20,000.
Required:
Prepare Saveed's general journal entry for the cash purchase of Penny's net assets.
Definitions:
Demand Curve
A graph showing the relationship between the price of a good and the quantity of that good consumers are willing and able to purchase, typically depicting a downward slope.
Competitive Market
A market structure characterized by numerous buyers and sellers, ensuring no single participant has the power to significantly influence prices.
Average Total Cost
The per unit cost of production, calculated by dividing the total cost of production by the quantity of output produced.
Normal Profit
The minimum amount of profit needed for a company to remain operational in the long term, often considered as part of fixed costs.
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