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Patterson Company is acquiring the net assets of Sheila Company by issuing 87,000 of its $3 par value shares of common stock. The shares have a fair value of $7 each. Just prior to the acquisition, Sheilas balance sheet was as follows:

Sheila Company

Balance Sheet

January 1, 20X1

Assets Liabilities and Equity

Accounts receivable. $ 46,000 Current Liabilities.. $101,000

Inventory 134,000 Bonds payable 263,000 $ 364,000

Equipment (net). 155,000 Stockholders equity:

Land.. 189,000 Common Stock ($1 par)$ 80,000

Building (net). 107,000 Retained earnings.. 187,000 267,000

Total assets.. $ 631,000 Total liabilities and equity $ 631,000

Fair values of some assets and liabilities are as follows:

Inventory $ 142,000

Land 193,000

Building 171,000

Current liabilities 87,000

Bonds payable 241,000

The following additional information is available:

• The equipment will be sold for an estimated price of $80,000. A 15% commission will be paid to a broker.
• A major R&D project is underway. The accumulated costs are $37,000, and the estimated value of the work is $48,000.
• A warranty attaches to products sold in the past. The estimated future repair costs under the warranty are $45,000.
• Sheila has a customer list that has value. It is estimated that the list will provide additional income of $97,000 for those four years. An intangible assets such as this is valued at a 12% rate of return.

Record the acquisition of Sheila Company on the books of Patterson Company. Provide calculations where needed.

• Sheila has a Brand name that has value. It is estimated that the brand name will provide additional income of $63,000 for those five years. An intangible assets such as this is valued at a 11% rate of return. Record the acquisition of Sheila Company on the books of Patterson Company. Provide calculations where needed.

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