Parrot Incorporated Purchased the Assets and Liabilities of Sparrow Company

question 2

Essay

Parrot Incorporated purchased the assets and liabilities of Sparrow Company at the close of business on December 31, 2011.Parrot borrowed $2,000,000 to complete this transaction, in addition to the $640,000 cash that they paid directly.The fair value and book value of Sparrow's recorded assets and liabilities as of the date of acquisition are listed below.In addition, Sparrow had a patent that had a fair value of $50,000.
Required:
1.Prepare Parrot's general journal entry for the acquisition of Sparrow, assuming that Sparrow survives as a separate legal entity.
2.Prepare Parrot's general journal entry for the acquisition of Sparrow, assuming that Sparrow will dissolve as a separate legal entity.

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Definitions:

Gastrin

A hormone secreted by the stomach that stimulates secretion of gastric acid.

Stomach

A muscular hollow organ in the gastrointestinal tract of humans and many animals, where digestion of proteins begins.

Liver

The liver is a vital organ that plays a central role in metabolic processes including detoxification, producing plasma proteins, and secreting bile.

Pancreas

A glandular organ in the digestive and endocrine system that produces hormones and enzymes to aid in digestion and blood sugar regulation.