Effective December 31, 2023, Zintel Corporation proposes to issue additional shares of its common stock in exchange for all the assets and liabilities of Smith Corporation and Platz Corporation, after which Smith and Platz will distribute the Zintel stock to their stockholders in complete liquidation and dissolution. Balance sheets of each of the corporations immediately prior to merger on December 31, 2023, follow. The common stock exchange ratio was negotiated to be 1:1 for both Smith and Platz.

Required:
Prepare journal entries on Zintel’s books to record the combination. Assume the following: The identifiable assets and liabilities of Smith and Platz are all reflected in the balance sheets (above), and their recorded amounts are equal to their current fair values except for long- term assets. The fair value of Smith’s long- term assets exceed their book value by $20,000, and the fair value of Platz’s long- term assets exceed their book values by $5,000. Zintel’s common stock is traded actively and has a current market price of $15 per share. Prepare journal entries on Zintel’s books to record the combination. (AICPA adapted)

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Current assets Long-term assets (net) Total Current liabilities Long-term debt Common stock, $5 par value Retained earnings Total Zintel $1,600,000 5,700,000 $7,300,000 $ 700,000 1,100,000 2,500,000 3,000,000 $7,300,000 Smith $ 350,000 1,890,000 $2,240,000 $ 110,000 430,000 700,000 1,000,000 $2,240,000 Platz $ 12,000 98,000 $110,000 $ 9,000 61,000 20,000 20,000 $110,000