Question

Parrot Incorporated purchased the assets and liabilities ofSparrow Company at the close of business on December 31, 2013.Parrot borrowed $2,000,000 to complete this transaction, inaddition to the $640,000 cash that they paid directly. The fairvalue and book value of Sparrow's recorded assets and liabilitiesas of the date of acquisition are listed below. In addition,Sparrow had a patent that had a fair value of $50,000. Book ValueFair Value Cash $120,000 $120,000 Inventories 220,000 250,000 Othercurrent assets 630,000 600,000 Land 270,000 320,000 Plantassets-net 4,650,000 4,600,000 Total assets $5,890,000 $5,890,000Accounts payable $1,200,000 $1,200,000 Notes payable 2,100,0002,100,000 Capital stock, $5 par 700,000 Additional paid-in capital1,400,000 Retained earnings 490,000 Total liabilities &equities $5,890,000 Part 1: Prepare Parrot's general journal entryfor the acquisition of Sparrow, assuming that Sparrow survives as aseparate legal entity. Part 2: Prepare Parrot's general journalentry for the acquisition of Sparrow, assuming that Sparrow willdissolve as a separate legal entity.