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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