P1-3 Journal entries and balance sheet for an acquisition On January 2, 2016, Pam Corporation issues its own $10 par common stock for all the outstanding stock of Sun Corporation in an acquisition. Sun is dissolved. In addition, Pam pays $40,000 for registering and issuing securities and $60,000 for other costs of combination. The market price of Pam’s stock on January 2, 2016, is $60 per share. Relevant balance sheet information for Pam and Sun Corporations on December 31, 2015, just before the combination, is as follows (in thousands):

Pam Historical Cost Sun Historical Cost Sun Fair Value Cash $ 240 $ 20 $ 20 Inventories 100 60 120 Other current assets 200 180 200 Land 160 40 200 Plant and equipment—net 1,300 400 700 Total assets $2,000 $700 $1,240 Liabilities $ 400 $100 $ 100 Capital stock, $10 par 1,000 200 Additional paid-in capital 400 100 Retained earnings 200 300 Total liabilities and owners’ equity $2,000 $700 REQuIRED 1. Assume that Pam issues 25,000 shares of its stock for all of Sun’s outstanding shares.

a. Prepare journal entries to record the acquisition of Sun.

b. Prepare a balance sheet for Pam Corporation immediately after the acquisition.

2. Assume that Pam issues 15,000 shares of its stock for all of Sun’s outstanding shares.

a. Prepare journal entries to record the acquisition of Sun.

b. Prepare a balance sheet for Pam Corporation immediately after the acquisition.