Allocation schedule and balance sheet The balance sheets of Phule Corporation and Sen Corporation at December 31, 2005, are summa¬ rized together with fair value information as follows (in thousands):

Phule Corporation Sen Corporation Book Value Fair Value Book Value Fair Value Assets Cash

$115

$115

$ 10

$ 10 Receivables—net 40 40 20 20 Inventories 120 150 50 30 Land 45 100 30 100 Buildings—net 200 300 100 150 Equipment—net 180 245 90 150 Total assets

$700

$950

$300

$460 Equities Accounts payable

$ 90

$ 90

$ 30

$ 30 Other liabilities 100 90 60 70 Capital stock, $10 par 300 100 Other paid-in capital 100 80 Retained earnings 110 30 Total equities

$700

$300 On January 1, 2006, Phule Corporation acquired all of Sen Corporation’s outstanding stock for $300,000. Phule paid $100,000 cash and issued a five-year, 12% note for the balance. Sen Corporation was dissolved.

Business Combinations 25 REQUIRED 1. Prepare a schedule to show how the investment cost is allocated to identifiable assets and liabilities. 2. Prepare a balance sheet for Phule Corporation on January 1, 2006, immediately after the business combination.