Glass Company is thinking about acquiring Plastic Company. Glass Company is considering two methods of accomplishing control and is wondering how the accounting treatment will differ under each method. Glass Company has estimated that the fair values of Plastic’s net assets are equal to their book values, except for the equipment which is understated by Br. 20,000. The following balance sheets have been prepared on the date of acquisition: Assets Glass Plastic Cash Br. 520,000 Br. 40,000 Accounts receivable 50,000 70,000 Inventory 50,000 100,000 Property, plant, and equipment (net) 250,000 250,000 Total assets Br. 870,000 Br. 460,000 Liabilities and Equity Current liabilities Br. 140,000 Br. 80,000 Bonds payable 250,000 100,000 Stockholders’ equity: Common stock, (Br. 100 par) 200,000 150,000 Retained earnings 280,000 130,000 Total liabilities and equity Br. 870,000 Br. 460,000Required:1) Assume Glass Company purchased the net assets directly from Plastic Company for Br. 500,000.a. Prepare the entry that Glass Company would make to record the purchase.b. Prepare the balance sheet for Glass Company immediately following the purchase.
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