On March 31, 2015, Pal. Company issued 100,000 shares of its $1 par ordinary shares (current fair value $5 a share) for the net assets of Sanabel Company. Also on that date, Pal. paid the following out-of-pocket costs in connection with the combination: Finder's, accounting, and legal fees relating to business combination Costs associated with SEC registration statement Total out-of-pocket costs of business combination $ 70,000 50,000 $120,000 The balance sheet of Sanabel on March 31, 2015, with related current fair values, was as follows: Balance Sheet (prior to business combination) March 31, 2015 Carrying Assets Current assets Plant assets (net) Other assets (none intangible) Current Amounts Fair Values $200,000 $260,000 400,000 480,000 140,000 150,000 $740,000 Total assets Liabilities and Stockholders' Equity Current liabilities Long-term debt Common stock, no par or stated value $ 80,000 $ 80,000 260,000 260,000 150,000 Retained earnings 250,000 Total liabilities and stockholders' equity $740,000 Required: Prepare journal entries (omit explanations) for Pal. Company on March 31, 2015, to record the business combination with Sanabel Company.

On March 31, 2015, Pal. Company issued 100,000 shares of its $1 par ordinary shares (current fair value $5 a share) for the net assets of Sanabel Company. Also on that date, Pal. paid the following out-of-pocket costs in connection with the combination: Finder's, accounting, and legal fees relating to business combination Costs associated with SEC registration statement Total out-of-pocket costs of business combination $ 70,000 50,000 $120,000 The balance sheet of Sanabel on March 31, 2015, with related current fair values, was as follows: Balance Sheet (prior to business combination) March 31, 2015 Carrying Assets Current assets Plant assets (net) Other assets (none intangible) Current Amounts Fair Values $200,000 $260,000 400,000 480,000 140,000 150,000 $740,000 Total assets Liabilities and Stockholders' Equity Current liabilities Long-term debt Common stock, no par or stated value $ 80,000 $ 80,000 260,000 260,000 150,000 Retained earnings 250,000 Total liabilities and stockholders' equity $740,000 Required: Prepare journal entries (omit explanations) for Pal. Company on March 31, 2015, to record the business combination with Sanabel Company.

Financial Accounting

14th Edition

ISBN:9781305088436

Author:Carl Warren, Jim Reeve, Jonathan Duchac

Publisher:Carl Warren, Jim Reeve, Jonathan Duchac

Chapter15: Investments And Fair Value Accounting

Section: Chapter Questions

Problem 28E

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