Why would Edwards be willing to pay $1,500,000 and assume $500,000 of Freidman’s debts when the assets were only worth $1,400,000?

/in /by

Edwards Inc. entered into negotiations to purchase Freidman Inc. Freidman originally asked Edwards to pay $1,600,000, but eventually both parties agreed to a price of $1,500,000 and for Edwards to assume $500,000 of Freidman’s liabilities. The assets of Freidman were appraised for $1,400,000.

a) Why would Edwards be willing to pay $1,500,000 and assume $500,000 of Freidman’s debts when the assets were only worth $1,400,000?

b) Prepare Edward’s entry to record the purchase of Freidman.

 
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