On January 1, 2020, Pruitt Company issued 25,500 shares of its common stock in exchange for 85% of the outstanding common stock of Shah Company. Pruitt?s common stock had a fair value of $28 per share at that time (par value of $2 per share). Pruitt Company uses the cost method to account for its investment in Shah Company and files a consolidated income tax return. A schedule of the Shah Company assets acquired and liabilities assumed at book values (which are equal to their tax bases) and fair values follows.

Additional Information:

1. Pruitt?s income tax rate is 35%.

2. Shah?s beginning inventory was all sold during 2020.

3. Useful lives for depreciation and amortization purposes are:

Plant assets...........................10 yearsPatents.....................................8 yearsBond premium.....................10 years

4. Pruitt uses the straight-line method for all depreciation and amortization purposes.

Required:

A. Prepare the stock acquisition entry on Pruitt Company?s books.

B. Prepare the eliminating entries for a consolidated statements workpaper on January 1, 2020, immediately after acquisition.

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Book Valuel Item Тах Basis Fair Value Excess $ 125,000 $ -0- 28,000 33,500 100,000 Receivables (net) $125,000 167,000 86,500 467,000 95,000 Inventory Land Plant assets (net) 195,000 120,000 567,000 200,000 Patents 105,000 $1,207,000 $266,500 Total $940,500 $ 89,500 300,000 120,000 164,000 $ 89,500 360,000 $ -0- Current liabilities Bonds payable Common stock Other contributed capital Retained earnings 60,000 267,000 Total $940,500