1. The following book and fair values were available for Honeycutt Industries:

Account	Book Value	Fair Value
Inventory	$630,000	500,000
Land	$750,000	790,000
Buildings	$1,700,000	1,900,000
Customer Relationships	0	500,000
Accounts Payable	($80,000)	(80,000)
Common Stock	($2,000,000
Additional Paid in Capital	($500,000)
Retained Earnings, 1/1	($360,000)
Revenues	($420,000)
Expenses	$280,000

Flagg Inc. pays $3,000,000 cash and issues 10,000 shares of its $3 par value common stock (fair value of $50 per share) for all of Honeycutts common stock in a merger, after which Honeycutt Industries will cease to exist as a separate entity. Stock issue costs amount to $15,000 and Flagg pays $32,000 for legal fees to complete the transaction.

Required:

Prepare Flaggs journal entries to record the acquisition of Honeycutt Industries.