Question
Sally Company is acquired by Pat Company on January 1, 2012. Patty exchanges 60,000 shares of $ 1 par value, with a fair value of
Sally Company is acquired by Pat Company on January 1, 2012. Patty exchanges 60,000 shares of $ 1 par value, with a fair value of $ 18 per share, for the net assets of Sally Company. Pat incurs the following costs as a result of this transaction:
Acquisition costs Stock registration and issuance costs $ 25,000
Stock registration $ 10,000
The book balance and fair value on the day of acquisition at Sally Company is as follows :
Book Value | Fair Value | |
Cash | 100,000 | 100,000 |
Inventory | 250,000 | 270,000 |
Land | 200,000 | 180,000 |
Building Net | 250,000 | 300,000 |
Equipment Net | 200,000 | 220,000 |
Current liabilities | 80,000 | 80,000 |
Bonds payable | 500,000 | 425,000 |
Common stock | 200,000 | |
Additional paid-in capital | 100,000 | |
Retained earnings | 120,000 |
Instruction:
1. Prepare the analysis for this business combination
2 Prepare the general journal entry for the acquisition
3. Prepare the general journal entry to record the indirect and direct cost of the acquisition 4. Prepare the general journal entry to record the business combination in your ledgers.
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