Problem 1-36 (Algo) Business Combination LO 1-5

Following are the balance sheets of Power Boogie Musical Corporation and Shoot-Toot Tuba Company as of December 31, 20X5.

POWER BOOGIE MUSICAL CORPORATIONBalance SheetDecember 31, 20X5AssetsLiabilities and EquitiesCash$ 26,000Accounts Payable$ 46,000Accounts Receivable92,000Notes Payable50,000Allowance for Uncollectible Accounts(1,800)Mortgage Payable197,000Inventory201,000Bonds Payable197,000Plant and Equipment984,000Capital Stock ($10 par)492,000Accumulated Depreciation(164,000)Additional paid-in capital1,000Other Assets24,000Retained Earnings178,200Total Assets$ 1,161,200Total Liabilities and Equities$ 1,161,200

SHOOT-TOOT TUBA COMPANYBalance SheetDecember 31, 20X5AssetsLiabilities and EquitiesCash$ 500Accounts Payable$ 15,200Accounts Receivable25,000Notes Payable30,000Allowance for Uncollectible Accounts(1,000)Mortgage Payable66,000Inventory78,600Bonds Payable109,000Plant and Equipment459,000Capital Stock ($50 par)85,000Accumulated Depreciation(232,000)Additional paid-in capital139,000Other Assets27,200Retained Earnings(86,900)Total Assets$ 357,300Total Liabilities and Equities$ 357,300

In preparation for a possible business combination, a team of experts from Power Boogie Musical made a thorough examination and audit of Shoot-Toot Tuba. They found that Shoot-Toots assets and liabilities were correctly stated except that they estimated uncollectible accounts at $2,000. The experts also estimated the market value of the inventory at $46,000 and the market value of the plant and equipment at $519,000. The business combination took place on January 1, 20X6, and on that date Power Boogie Musical acquired all the assets and liabilities of Shoot-Toot Tuba. On that date, Power Boogies common stock was selling for $54 per share.

Required:

Record the combination on Power Boogies books assuming that Power Boogie issued 9,000 of its $10 par common shares in exchange for Shoot-Toots assets and liabilities.