Journal Entries to Record a Business Combination
On January 1, 20X2, Frost Company acquired all of TKK Corporation’s assets and liabilities by V issuing 24,000 shares of its $4 par value common stock. At that date, Frost shares were selling at $22 per share. Historical cost and fair value balance sheet data for TKK at the time of acquisition were as follows:
Balance Sheet Item | Historical Cost | Fair Value |
Cash and Receivables | $ 28,000 | $ 28,000 |
Inventory | 94,000 | 122,000 |
Buildings and Equipment | 600,000 | 470,000 |
Less: Accumulated Depreciation | (240,000) | _________ |
Total Assets | $482,000 | $620,000 |
Accounts Payable | $ 41,000 | $ 41,000 |
Notes Payable | 65,000 | 63,000 |
Common Stock ($10 par value) | 160,000 |
|
Retained Earnings | 216,000 |
|
Total Liabilities and Equities | $ 482,000 |
|
Frost paid legal fees for the transfer of assets and liabilities of $14,000. Frost also paid audit fees of $21,000 and listing application fees of $7,000, both related to the issuance of new shares.
Required
Prepare the journal entries made by Frost to record the business combination.
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