Patterson Company acquired all of Shapiro, Inc.'s outstanding shares on December 31, 2021 for $495,000 by issuing $200,000 in long term liabilities and paying $295,000 in cash. Patterson also paid in cash, $45,000, for legal and accounting fees associated with the acquisition.

Several of Shapiros accounts have fair values that differ from book values. Shapiro has also internally developed assets that remain unrecorded on its books (i.e., book value equals zero, but fair value is non-zero). Its remaining assets and liabilities have book values equal their fair values. The assets and liabilities with fair value and book value differences are reported as follows:

Book Values Fair Values

Computer software $ 20,000 $ 70,000

Equipment $ 40,000 $ 30,000

Client contracts $ - $ 100,000

In-process research and development $ - $ 40,000

Notes payable $ (60,000) $ (65,000)

On December 31, 2021, the pre-combination book values of both companies are as follows.

Patterson Shapiro

Cash $ 531,000 $ 18,000

Receivables $ 116,000 $ 52,000

Inventory $ 140,000 $ 90,000

Computer software $ 210,000 $ 20,000

Buildings (net) $ 595,000 $ 130,000

Equipment (net) $ 308,000 $ 40,000

Total assets $ 1,900,000 $ 350,000

Accounts payable $ (88,000) $ (25,000)

Notes payable $ (510,000) $ (60,000)

Common stock $ (380,000) $ (100,000)

Additional paid-in capital $ (170,000) $ (25,000)

Retained earnings $ (752,000) $ (140,000)

Total liabilities and equities $ (1,900,000) $ (350,000)

Note: Parentheses indicate a negative balance.

Assume that this combination is a statutory merger so that Shapiro will be dissolved and will no longer exist as a legal entity. Prepare the following:

Journal entries to record the business combination in Pattersons book.