PURCHASE VERSUS POOLING. Pearson Company and Staw Corporation enter into a business combination in which Pearson acquires all the outstanding common stock of Staw in exchange for newly issued shares of Pearson. Immediately before the business combination, the two corporations have the following balance sheets:

REQUIRED:
1. Write the entry by Pearson to record the combination as a pooling of interests.
2. Write the entry by Pearson to record the combination as a purchase.

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PEARSON COMPANY STAW CORPORATION Total assets $8,000 Total assets $1,000 Liabilities $2,200 Liabilities 8 300 Common stock ($10 par) 5,000 Common stock (85 par)...... 600 Retained earnings 800 Retained earnings 100 Total liabilities and equity. $8,000 Total liabilities and equity. $1,000 The business combination requires Pearson to issue 60 new shares of its common stock to the stockholders of Staw in exchange for all the Staw shares. The newly issued shares of Pearson have a market value of $800. The book values of Staw's identifiable assets and liabilities equal their corresponding fair values; thus, any excess of the newly issued stock's market value over book value is attributable to goodwill. As part of the combination, Staw Corporation ceases to exist as a separate corporation.