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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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