Business Combination

Anchor Corporation paid cash of $ 139,000 to acquire Zink Company’s net assets on February 1,
20X3. The balance sheet data for the two companies and fair value information for Zink immediately
before the business combination were:

Anchor Corporation Zink Company

Balance Sheet Item Book Value Book Value Fair Value
Cash $240,000 $20,000 $20,000
Accounts Receivable 140,000 35,000 35,000
Inventory 170,000 30,000 50,000
Patents 80,000 40,000 60,000
Buildings and Equipment 380,000 310,000 150,000
Less: Accumulated Depreciation (190,000) (200,000)
Total Assets $820,000 $235,000 $315,000

Accounts Payable $85,000 $55,000 $55,000

Notes Payable 150,000 120,000 120,000
Common Stock
$10 par value 200,000
$ 6 par value 18,000
Additional Paid-in Capital 160,000 10,000
Retained Earnings 225,000 32,000
Total Liabilities and Equities $820,000 $235,000

Required

a. Give the journal entry recorded by Anchor Corporation when it acquired Zink’s net assets.
b. Prepare a balance sheet for Anchor immediately following the acquisition.