Question
On January 1, 2022, Patterson Company exchanges 15,000 shares of its common stock for all outstanding shares of Shapiro, Inc. Each of Patterson's shares has
On January 1, 2022, Patterson Company exchanges 15,000 shares of its common stock for all outstanding shares of Shapiro, Inc. Each of Patterson's shares has a $4 par value and a $50 fair value. The fair value of the stock exchanged in the acquisition was considered equal to Shapiro's fair value. Patterson also paid $25,000 in stock registration and issuance costs in connection with the merger. Several of Shapiro's accounts' fair values differ from their book values on the acquisition date. The assets and liabilities with fair-and-book-value differences are reported as follows. Other assets and liabilities (not in this table) have their fair value equal to their book value. Precombination January 1, 2022, book values for the two companies are as follows: Note: Credit balances are in parentheses.
Assume that no dissolution takes place in connection with this combination. Rather, both companies retain their separate legal identities. Patterson will operate Shapiro as a wholly owned subsidiary with a separate legal and accounting identity. Prepare the following: 1. Journal entries to record the business combination. Show supporting calculations to get credit. 2. Using the worksheet provided , consolidate the two companies as of the combination date. Be sure to adjust Pattersons accounts for entries in (1) before preparing the consolidated balance sheet.
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