P1-8

[Appendix] Journal entries and balance sheet for a pooling of interests On January 2, 2000, Pop and Son Corporation merged their operations through a business combination accounted for as a pooling of interests. The $300,000 direct costs of combination were paid in cash by the surviving entity on January 2, 2000. At December 31, 1999, Son held 25,000 shares of Pop stock 50 CHAPTER 1 acquired at $20 per share. Summary balance sheet information for Pop and Son Corporations at December 31, 1999, was as follows (in thousands):

Pop Corporation Son Corporation Current assets $ 6,500 $ 4,500 Plant and equipment—net 10,000 10,000 Investment in Pop 500 Total assets $16,500 $15,000 Liabilities $ 1,500 $ 3,000 Common stock, $10 par 10,000 8,000 Additional paid-in capital 2,000 3,000 Retained earnings 3,000 1,000 Total equities $16,500 $15,000 REQuIRED: Assume that the surviving corporation was Pop Corporation and that Pop issued 1,000,000 shares of its own stock for all the outstanding shares of Son Corporation.

a. Prepare journal entries on the books of Pop Corporation to record the business combination.

b. Prepare a balance sheet for Pop Corporation on January 2, 2000, immediately after the business combination.