Obscure Advertising and Brown Company are considering joining forces in a business combination to be recorded as a pooling of interests. The balance sheet data of the two companies at the time of merger are as follows:

The shareholders of Brown Company agree to accept 4,000 shares of Obscure Advertising's \(\$ 10\) par value shares in exchange for the net assets of Brown Company in a business combination considered to be a pooling of interests.

\section*{Required}

a. Give the journal entry to be recorded by Obscure Advertising when it issues its shares in exchange for the net assets of Brown Company.

b. Prepare the balance sheet for Obscure Advertising immediately following the merger.

c. Give the journal entry to be recorded by Obscure Advertising if it issues its 4,000 shares in exchange for all of the common stock of Brown Company, instead of for Brown's net assets, and if both companies remain as separate corporations.

Transcribed Image Text:

Balance Sheet Item Obscure Advertising Brown Company Cash $ 75,000 Accounts Receivable Inventory Land Buildings and Equipment Less: Accumulated Depreciation Total Assets Accounts Payable Common Stock Additional Paid-In Capital Retained Earnings Total Liabilities and Equities 50,000 8,000 82,000 7,000 70,000 60.000 5,000 8,000 100,000 150,000 (40,000) (120,000) $215,000 $115,000 $ 75.000 $ 70,000 30,000 4,000 11,000 $215,000 $115,000 5,000 $ 10,000