Acquisition Entries, Various Types of Combinations, Acquisition Costs

Plastic Corporation is contemplating a business combination with Steel Corporation at December 31, 2011. Steel's condensed balance sheet on that date appears below (in millions):

Assets	Book Value	Fair Value
Cash and receivables	$42,000	$42,000
Inventory	42,000	54,000
Equity method investments	21,600	24,000
Land	9,600	13,200
Buildings and equipment	8,400	16,800
Patents	6,000	12,000
Total assets	$129,600
Liabilities and Stockholders' Equity
Liabilities	$26,400	$26,400
Common stock	60,000	--
Retained earnings	43,200	--
Total liabilities and equity	$129,600

Prepare the journal entry to record the business combination of Plastic and Steel for each of the following purchase prices and combination methods (data provided below are in millions).

(a) Plastic merges with Steel by acquiring all of Steel's stock for $150,000 cash, in a merger. Other direct cash acquisition costs are $30,000.

(in millions)

General Journal
Description	Debit	Credit
Cash and receivables	Answer	Answer
Inventory	Answer	Answer
Equity method investments	Answer	Answer
Land	Answer	Answer
Buildings and equipment	Answer	Answer
Patents	Answer	Answer
Goodwill	Answer	Answer
AnswerInvestment in SteelGain on acquisitionMerger expensesCashGoodwillContingent consideration liability	Answer	Answer
Liabilities	Answer	Answer
AnswerCashGain on acquisitionInvestment in SteelGoodwillContingent consideration liabilityMerger expenses	Answer	Answer

(b) Plastic merges with Steel by acquiring all of Steel's stock for $120,000 cash, in a merger. Other direct cash acquisition costs are $12,000.

(in millions)

General Journal
Description	Debit	Credit
Cash and receivables	Answer	Answer
Inventory	Answer	Answer
Equity method investments	Answer	Answer
Land	Answer	Answer
Buildings and equipment	Answer	Answer
Patents	Answer	Answer
AnswerContingent consideration liabilityMerger expensesGoodwillGain on acquisitionInvestment in SteelCash	Answer	Answer
Liabilities	Answer	Answer
Cash	Answer	Answer
AnswerCashContingent consideration liabilityGoodwillMerger expensesInvestment in SteelGain on acquisition	Answer	Answer

(c) Plastic merges with Steel by acquiring all of Steel's stock for $135,000 cash, in a merger. Other direct cash acquisition costs are $15,000.

(in millions)

General Journal
Description	Debit	Credit
AnswerCashContingent consideration liabilityMerger expensesGain on acquisitionInvestment in SteelGoodwill	Answer	Answer
Merger expenses	Answer	Answer
AnswerContingent consideration liabilityGoodwillMerger expensesCashInvestment in SteelGain on acquisition	Answer	Answer