E1-6

[Appendix] Journal entries to record business combinations Pop Company issued 120,000 shares of $10 par common stock with a fair value of $2,550,000 for all the voting common stock of Son Company. In addition, Pop incurred the following additional costs:

Legal fees to arrange the business combination $25,000 Cost of SEC registration, including accounting and legal fees 12,000 Cost of printing and issuing new stock certificates 3,000 Indirect costs of combining including allocated overhead and executive salaries 20,000 Immediately before the business combination in which Son Company was dissolved, Son’s assets and equities were as follows (in thousands):

Book Value Fair Value Current assets $1,000 $1,100 Plant assets 1,500 2,200 Liabilities 300 300 Common stock 2,000 Retained earnings 200 REQuIRED: Assume that the business combination is a pooling of interests. Prepare all journal entries on Pop’s books to record the business combination.