Business Combination
Following are the balance sheets of Boogie Musical Corporation and Toot-Toot Tuba Company as of December 31, 20X5.
BOOGIE MUSICAL CORPORATION Balance Sheet December 31, 20X5 | ||||
Assets |
| Liabilities and Equities |
|
|
Cash | $ 23,000 | Accounts Payable | $ | 48,000 |
Accounts Receivable | 85,000 | Notes Payable |
| 65,000 |
Allowance for Uncollectible Accounts | (1,200) | Mortgage Payable |
| 200,000 |
Inventory | 192,000 | Bonds Payable |
| 200,000 |
Plant and Equipment | 980,000 | Capital Stock ($10 par) |
| 500,000 |
Accumulated Depreciation | (160,000) | Premium on Capital Stock |
| 1,000 |
Other Assets | 14,000 | Retained Earnings |
| 118,800 |
Total Assets | $1,132,800 | Total Liabilities and Equities | $1 | ,132,800 |
TOOT-TOOT TUBA COMPANY Balance Sheet December 31, 20X5 | |||
Assets |
| Liabilities and Equities |
|
Cash | $ 300 | Accounts Payable | $ 8,200 |
Accounts Receivable | 17,000 | Notes Payable | 10,000 |
Allowance for Uncollectible Accounts | (600) | Mortgage Payable | 50,000 |
Inventory | 78,500 | Bonds Payable | 100,000 |
Plant and Equipment | 451,000 | Capital Stock ($50 par) | 100,000 |
Accumulated Depreciation | (225,000) | Premium on Capital Stock | 150,000 |
Other Assets | 25,800 | Retained Earnings | (71,200) |
Total Assets | $347,000 | Total Liabilities and Equities | $347,000 |
In preparation for a possible business combination, a team of experts from Boogie Musical made a thorough examination and audit of Toot-Toot Tuba. They found that Toot-Toot’s assets and liabilities were correctly stated except that they estimated uncollectible accounts at $1,400. The experts also estimated the market value of the inventory at $35,000 and the market value of the plant and equipment at $500,000. The business combination took place on January 1, 20X6, and on that date Boogie Musical acquired all the assets and liabilities of Toot-Toot Tuba. On that date, Boogie’s common stock was selling for $55 per share.
Required
Record the combination on Boogie’s books assuming that Boogie issued 9,000 of its $10 par common shares in exchange for Toot-Toot’s assets and liabilities.
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