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Bargain purchase, allocation schedule, and balance sheet
The balance sheets for Pablo Corporation and Diego Corporation at December 31, 2016 are summarized
as follows (in thousands):
Pablo Corporation Diego Corporation
Book Value Fair Value Book Value Fair Value
Assets
Cash $100 $100 $40 $40
Receivables-net 50 50 30 30
Inventories 130 150 80 100
Land 50 100 30 50
Buildings-net 150 200 70 100
Equipment-net 100 150 50 75
Total assets $580 $750 $300 $395
Equities
Accounts payable $ 80 $ 80 $ 50 $ 50
Other liabilities 100 90 75 45
Common stock, $10 par 200 100
Other paid-in capital 100 25
Retained earnings 100 50
Total equities $580 $300
On January 1, 2017, Pablo Corporation acquired all of Diego Corporation’s outstanding common stock
for $250,000. Pablo paid $50,000 in cash and issued a five-year, 10 percent note for the balance. Diego
was dissolved.
REQUIRED
1. Prepare schedule to show how the investment cost is allocated to identifiable assets and liabilities.
2. Prepare balance sheet for Pablo Corporation on January 1, 2017, immediately after the acquisition
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