E 1-5 Journal entries to record an acquisition with direct costs and fair value/book value differences On January 1, Pop Corporation pays $400,000 cash and also issues 36,000 shares of $10 par common stock with a market value of $660,000 for all the outstanding common shares of Son Corporation. In addition, Pop pays $60,000 for registering and issuing the 36,000 shares and $140,000 for the other direct costs of the business combination, in which Son Corporation is dissolved. Summary balance sheet information for the companies immediately before the merger is as follows (in thousands): Pop Book Value Son Book Value Son Fair Value Cash $ 700 $ 80 $ 80 Inventories 240 160 200 Other current assets 60 40 40 Plant assets—net 520 360 560 Total assets $1,520 $640 $880 Current liabilities $ 320 $ 60 $ 60 Other liabilities 160 100 80 Common stock, $10 par 840 400 Retained earnings 200 80 Total liabilities and owners’ equity $1,520 $640 Required: Prepare all journal entries on Pop’s books to account for the acquisition.
E 1-5 Journal entries to record an acquisition with direct costs and fair value/book value differences
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On January 1, Pop Corporation pays $400,000 cash and also issues 36,000 shares of $10 par common stock with a market value of $660,000 for all the outstanding common shares of Son Corporation. In addition, Pop pays $60,000 for registering and issuing the 36,000 shares and $140,000 for the other direct costs of the business combination, in which Son Corporation is dissolved. Summary balance sheet information for the companies immediately before the merger is as follows (in thousands):
Pop Book Value
Son Book Value
Son Fair Value
Cash
$ 700
$ 80
$ 80
Inventories
240
160
200
Other current assets
60
40
40
Plant assets—net
520
360
560
Total assets
$1,520
$640
$880
Current liabilities
$ 320
$ 60
$ 60
Other liabilities
160
100
80
Common stock, $10 par
840
400
Retained earnings 200
80
Total liabilities and owners’ equity
$1,520
$640
Required:
Prepare all journal entries on Pop’s books to account for the acquisition.
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