Purchase Effective December 31, 2003, Zintel Corporation proposes to issue additional shares of its common stock in exchange for all the assets and liabilities of Smith Corporation and Platz Corporation, after which Smith and Platz will distribute the Zintel stock to their stockholders in complete liquidation and dissolution. The balance sheets of each of the corporations immediately prior to merger on December 31, 2003, follow. The common stock exchange ratio was negotiated to be 1:1 for both Smith and Platz. LO4 Zintel Smith Platz Current Assets $1,600,000 $350,000 $ 12,000 Long-Term Assets (net) 5,700,000 1,890,000 98,000 Total Assets $7,300,000 $2,240,000 $110,000 Current Liabilities $700,000 $110,000 $9,000 Long-Term Debt 1,100,000 430,000 61,000 Common Stock, $5 par value 2,500,000 700,000 20,000 Retained Earnings 3,000,000 1,000,000 20,000 Total Equities $7,300,000 $2,240,000 $110,000 Required:
Prepare journal entries on Zintel’s books to record the combination. Assume the following:
The identifiable assets and liabilities of Smith and Platz are all reflected in the balance sheets (above), and their recorded amounts are equal to their current fair values except for longterm assets. The fair value of Smith’s long-term assets exceeds their book value by $20,000 and the fair value of Platz’s long-term assets exceeds their book values by $5,000. Zintel’s common stock is traded actively and has a current market price of $15 per share. Prepare journal entries on Zintel’s books to record the combination. (AJCPA adapted)