Question

Following are the balance sheets of Power Boogie Musical Corporation and Shoot-Toot Tuba Company as of December 31, 20X5.

POWER BOOGIE MUSICAL CORPORATION
Balance Sheet
December 31, 20X5
Assets					Liabilities & Equities
Cash	$	23,000			Accounts Payable	$	48,000
Accounts Receivable		85,000			Notes Payable		65,000
Allowance for Uncollectible Accounts		(1,200	)		Mortgage Payable		200,000
Inventory		192,000			Bonds Payable		200,000
Plant & Equipment		980,000			Capital Stock ($10 par)		500,000
Accumulated Depreciation		(160,000	)		Premium on Capital Stock		1,000
Other Assets		14,000			Retained Earnings		118,800
Total Assets	$	1,132,800			Total Liabilities & Equities	$	1,132,800

SHOOT-TOOT TUBA COMPANY
Balance Sheet
December 31, 20X5
Assets					Liabilities & Equities
Cash	$	300			Accounts Payable	$	8,200
Accounts Receivable		17,000			Notes Payable		10,000
Allowance for Uncollectible Accounts		(600	)		Mortgage Payable		50,000
Inventory		78,500			Bonds Payable		100,000
Plant & Equipment		451,000			Capital Stock ($50 par)		100,000
Accumulated Depreciation		(225,000	)		Premium on Capital Stock		150,000
Other Assets		25,800			Retained Earnings		(71,200	)
Total Assets	$	347,000			Total Liabilities & Equities	$	347,000

In preparation for a possible business combination, a team of experts from Power Boogie Musical made a thorough examination and audit of Shoot-Toot Tuba. They found that Shoot-Toot's assets and liabilities were correctly stated except that they estimated uncollectible accounts at $1,400. The experts also estimated the market value of the inventory at $35,000 and the market value of the plant and equipment at $500,000. The business combination took place on January 1, 20X6, and on that date Power Boogie Musical acquired all the assets and liabilities of Shoot-Toot Tuba. On that date, Power Boogie’s common stock was selling for $55 per share.

Required:
Record the combination on Power Boogie's books assuming that Power Boogie issued 9,000 of its $10 par common shares in exchange for Shoot-Toot’s assets and liabilities. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Answer 1