Pence Company is considering acquiring the business of Schilling Company. For simplicity, assume that Schilling's only asset is land that has a book value of $400,000 and a current value of $520,000. Schilling's only liability is $80,000 of accounts payable. Assume that Pence intends to give $560,000 cash as consideration.
Required:
Record the entries that would be made on Pence's books and on Schilling's books under the following assumptions:
a. Pence acquires 100% of Schilling's outstanding common stock.
b. Pence acquires all the assets of Schilling and assumes responsibility for Schilling's liabilities of $80,000.

Question

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The Answer of Pence Company is considering acquiring the business of Schilling Company. For simplicity, assume that Schilling's only asset is land that has a book value of $400,000 and a current value of $520,000. Schilling's only liability is $80,000 of accounts payable. Assume that Pence intends to give $560,000 cash as consideration.
Required:
Record the entries that would be made on Pence's books and on Schilling's books under the following assumptions:
a. Pence acquires 100% of Schilling's outstanding common stock.
b. Pence acquires all the assets of Schilling and assumes responsibility for Schilling's liabilities of $80,000.

Pence Company Is Considering Acquiring the Business of Schilling Company