On July 1, 2014, Pipe Corporation issued 23,000 shares of its own $2 par value...
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On July 1, 2014, Pipe Corporation issued 23,000 shares of its own $2 par value common stock for 40,000 shares of the outstanding stock of Sector Inc. in an acquisition. Pipe common stock at July 1, 2014 was selling at $16 per share. Just before the business combination, balance sheet information of the two corporations was as follows:
Required:
1. Prepare the journal entry on Pipe Corporation's books to account for the investment in Sector Inc.
2. Prepare a consolidated balance sheet for Pipe Corporation and Subsidiary immediately after the business combination.
Pipe Sector Sector Book Value Cash $25,000 Inventories 55,000 Other current assets 110,000 Land 100,000 Plant and equipment-net 660,000 $950,000 Book Value $17,000 42,000 40,000 45,000 220,000 $364,000 Fair Value $17,000 47,000 30,000 35,000 280,000 $409,000 $75,000 Liabilities $220,000 Capital stock, $2 par value 500,000 Additional paid-in capital 170,000 Retained earnings 60,000 $950,000 $70,000 100,000 90,000 104,000 $364.000
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