Recording Business Combinations
Flint Corporation exchanged shares of its $2 par common stock for all of Mark Company’s assets and liabilities in a planned merger. Immediately prior to the combination, Mark’s assets and liabilities were as follows:
Assets | |
Cash and Equivalents | $ 41,000 |
Accounts Receivable | 73,000 |
Inventory | 144,000 |
Land | 200,000 |
Buildings | 1,520,000 |
Equipment | 638,000 |
Accumulated Depreciation | (431,000) |
Total Assets | $2,185,000 |
Liabilities and Equities | |
Accounts Payable | $ 35,000 |
Short-Term Notes Payable | 50,000 |
Bonds Payable | 500,000 |
Common Stock ($10 par) | 1,000,000 |
Additional Paid-In Capital | 325,000 |
Retained Earnings | 275,000 |
Total Liabilities and Equities | $2,185,000 |
Immediately prior to the combination, Flint reported $250,000 additional paid-in capital and $1,350,000 retained earnings. The fair values of Mark’s assets and liabilities were equal to their book values on the date of combination except that Mark’s buildings were worth $1,500,000 and its equipment was worth $300,000. Costs associated with planning and completing the business combination totaled $38,000, and stock issue costs totaled $22,000. The market value of Flint’s stock at the date of combination was $4 per share.
Required
Prepare the journal entries that would appear on Flint’s books to record the combination if Flint issued 450,000 shares.
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