On January 1, 2012, Pruitt Company issued 30,000 shares of its $2 par value common stock for the net assets of Shah Company in a statutory merger accounted for as a purchase. Pruitt’s common stock had a fair value of $28 per share at that time. A schedule of the Shah Company assets acquired and liabilities assumed at book values (which are equal to their tax bases) and fair values follows:

Additional Information:
1. Pruitt’s income tax rate is 35%.
2. Shah’s beginning inventory was all sold during 2012.
3. Useful lives for depreciation and amortization purposes are:
Plant assets......10 years
Patents......8 years
Bond premium....10 years
4. Pruitt uses the straight-line method for all depreciation and amortization purposes.

Required:
A. Prepare the entry on Pruitt Company’s books to record the acquisition of the assets and assumption of the liabilities of Shah Company.
B. Assuming Pruitt Company had taxable income of $468,000 in 2012, prepare the income tax entry for2012.

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Itenm Book Value/Tax Basis Fair Value Receivables (net) Inventory Land Plant assets (net) Patents Total $125,000 167,000 86,500 467,000 95,000 $125,000 195,000 120,000 567,000 200,000 $1,207,000 89,500 60,000 28,000 3,500 100,000 105,000 $266,500 Current liabilities Bonds pavable Common stock Other contributed capital Retained earnings Total $940500 89,500 300,000 120,000 164,000 267,000 940,500 60,000