Problem

The balance sheets of Pub Corporation and Sun Corporation at December 31, 2010, are summar...

The balance sheets of Pub Corporation and Sun Corporation at December 31, 2010, are summarized with fair value information as follows (in thousands):

 

Pub Corporation

Sun Corporation

 

Book Value

Fair Value

Book Value

Fair Value

Assets

Cash

$115

$115

$ 10

$ 10

Receivables—net

40

40

20

20

Inventories

120

150

50

30

Land

45

100

30

100

Buildings—net

200

300

100

150

Equipment—net

180

245

90

150

Total assets

$700

$950

$300

$460

Equities

Accounts payable

$ 90

$ 90

$ 30

$ 30

Other liabilities

100

90

60

70

Capital stock, $10 par

300

 

100

 

Other paid-in capital

100

 

80

 

Retained earnings

110

 

30

 

Total equities

$700

 

$300

 

On January 1, 2011, Pub Corporation acquired all of Sun’s outstanding stock for $300,000. Pub paid $100,000 cash and issued a five-year, 12 percent note for the balance. Sun was dissolved.

REQUIRED

1. Prepare a schedule to show how the investment cost is allocated to identifiable assets and liabilities.


2. Prepare a balance sheet for Pub Corporation on January 1, 2011, immediately after the acquisition.

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