ADVANCED ACCOUNTINGUNIT 2 POST PROBLEM 1 - MERGER

On June 30, 200X Carl Corporation purchased Lin Company by issuing 50,000 shares of stock.Stock has a market value of $15.00 per share.This acquisition is to be recorded as a statutory merger through asset acquisition.In this type of business combination Carl company acquires all the assets and liabilities of Lin Company.Lin Company is dissolved and goes out of business.Prepare the entries the purchase and combination on June 30, 200X.

Following information is shown prior to the merger activity being recorded:

Carl Company

AssetsLiabilities and Capital

Cash$80,000Current Liabilities$ 80,000

Inventories80,000

Plant300,000Common Stock $5PV10,000

Land20,000Additional Paid in Capital190,000Retained Earnings200,000

Total$480,000Total$480,000

Lin Company

AssetsLiabilities and Capital

Cash$200,000Current Liabilities$100,000

Accounts Receivable20,000Common Stock $10PV150,000

Plant Assets530,000Additional Paid in Capital400,000Retained Earnings100,000

Total$750,000Total$750,000

Other information:

The Lin Company Plant Assets fair market value is $600,000.

The out of pocket costs of the merger are:

SEC Registration Statement fee$20,000

Legal fees for the SEC Registration Statement$15,000

Accounting fees for the SEC Registration Statement$5,000

Finders Fee$6,000

Legal fees for the merger$2,000

Accounting fees for the merger$4,000

1.Prepare and post the entries to record this as a statutory merger.In a statutory merger permanent dissolution of the subsidiary occurs at the combination date.

2.Prepare a after merger balance sheet.