Deferred Tax Effects at Date of Acquisition Profeet Company purchased the Starless Company in a nontaxable purchase combination consummated as a stock acquisition. Profeet issued 10,000 shares of $5 par value common stock, with a market value of $70, in exchange for all the stock of Starless. The following information about Starless Company is available on the combination date. LO7 Starless Company Book Value of Net Assets Deferred Tax Liability from using Modified Accelerated Cost Recover System

(MACRS) depreciation for tax purposes Other Items Fixed Assets Long-Term Debt The current and future tax rate is expected to be 40%.

$600,000 24,000 Book Value Fair Value

$410,000 $490,000 450,000 500,000 Required:

Prepare the journal entry to record the acquisition, taking into account tax effects.