Integrated Industries Inc. entered into a business combination agreement with Hydrolized Chemical Corporation (HCC) to assure an uninterrupted supply of key raw materials and to realize certain economies from combining the operating processes and the marketing efforts of the two companies. Under the terms of the agreement, Integrated Industries issued 180,000 shares of its \(\$ 1\) par common stock in exchange for all the assets and liabilities of HCC. The Integrated Industries shares then were distributed to the shareholders of \(\mathrm{HCC}\), and \(\mathrm{HCC}\) was liquidated.

Immediately prior to the combination, HCC's balance sheet appeared as follows, with fair values also indicated:

Immediately prior to the combination, Integrated Industries common stock was selling for \(\$ 14\) per share. Integrated Industries incurred direct costs of \(\$ 135,000\) in arranging the business combination and \(\$ 42,000\) of costs associated with registering and issuing the common stock used in the combination.
\section*{Required}

a. Prepare all journal entries that Integrated Industries should have entered on its books to record the combination as a purchase.

b. Present all joumal entries that should have been entered on the books of HCC to record the combination and the distribution of the stock received, assuming the combination was treated as a purchase.

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Book Values Fair Values Assets Cash Accounts Receivable Less: Allowance for Bad Debts Inventory Long-Term Investments $ 28,000 258,000 (6.500) $ 28,000 251.500 381.000 395.000 150,000 175,000 Land 55.000 100.000 Rolling Stock 130,000 63.000 Plant and Equipment 2,425,000 2.500.000 Less: Accumulated Depreciation (614,000) Patents 125.000 500,000 Special Licenses 95.800 100.000 Total Assets Liabilities Current Payables Mortgages Payable Equipment Trust Notes Debentures Payable Less: Discount on Debentures Total Liabilities Stockholders' Equity Common Stock ($5 par) Additional Paid-In Capital from Common Stock Additional Paid-In Capital from Retirement of Preferred Stock Retained Earnings Less: Treasury Stock (1,500 shares) Total Liabilities and Equity $3.027,300 $4.112.500 $ 137.200 500,000 100,000 $ 137.200 520,000 95.000 950.000 1,000,000 (40,000) $1.697.200 $1,702,200 600,000 500,000 22,000 220,100 (12.000) $3,027,300