Bargain purchase, allocation schedule, and balance sheet The balance sheets for Pablo Corporation and Diego Corporation at December 31, 2016 are…

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


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


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.


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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