Problem

On January 1, Pan Corporation pays $400,000 cash and also issues 36,000 shares of $10 par...

On January 1, Pan 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 Sis Corporation. In addition, Pan 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 Sis Corporation is dissolved. Summary balance sheet information for the companies immediately before the merger is as follows (in thousands):

 

Pan Book Value

Sis Book Value

Sis 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

 

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