Problem

Pan Company issued 960,000 shares of $10 par common stock with a fair value of $20,400,000...

Pan Company issued 960,000 shares of $10 par common stock with a fair value of $20,400,000 for all the voting common stock of Set Company. In addition, Pan incurred the following costs:

Legal fees to arrange the business combination

$200,000

Cost of SEC registration, including accounting and legal fees

96,000

Cost of printing and issuing net stock certificates

24,000

Indirect costs of combining, including allocated overhead and executive salaries

160,000

Immediately before the acquisition in which Set Company was dissolved, Set’s assets and equities were as follows (in thousands):

 

Book Value

Fair Value

Current assets

$ 8,000

$ 8,800

Plant assets

12,000

17,600

Liabilities

2,400

2,400

Common stock

16,000

 

Retained earnings

1,600

 

REQUIRED: Prepare all journal entries on Pan’s books to record the acquisition.

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