Sally Company is acquired by Pat Company on January 1, 2012. Patty exchanges 60,000 shares...
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Accounting
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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