• The balance sheets of Petrello Company and Sanchez Company as of January 1, 2014, are presented below. On that date, afer an extended period of negotiation, the two companies agreed to merge. To effect the merger, Petrello Company is to exchange its unissued common stock for all the outstanding shares of Sanchez Company in the ratio of ½ share of Petrello for each share of Sanchez. Market values of the shares were agreed on as Petrello, $48 and Sanchez $24. The fair values of Sanchez Company’s assets and liabilities are equal to their book values with the exception of plant and equipment, which has an estimated fair values of $720,000.