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Internet Corporation is considering the acquisition of Homepage Corporation and has obtained the following audited condensed balance sheet:
Internet Corporation is considering the acquisition of Homepage Corporation and has obtained the following audited condensed balance sheet:
Assets
Current assets 40,000
Land 20,000
Buildings (net) 80,000
Equipment (net) 60,000
Total Assets 200,000
Liabilities and Equity
Current Liabilities 60,000
Capital Stock (50,000 shares, $1 par value) 50,000
Other Paid In Capital 20,000
Retained Earnings 70,000
Total Liabilities and Equity 200,000
Internet also acquired the following fair values for Homepage's assets and liabilities:
Current Assets 55,000
Land 60,000
Buildings (net) 90,000
Land (net) 75,000
Current Liabilities (60,000)
Total 220,000
Internet and Homepage agree on a price of 280,000 for Homepage's net assets.
Prepare the necessary journal entry to record the purchase given the following scenarios:
A. Internet pays cash for Homepage Corporation and incurs 5,000 of direct acquisition costs
B. Internet issues its $5 par value stock as consideration. The fair value of the stock at the acquisition date is $50 per share. Additionally, Internet incurs 5,000 of security insurance costs
