Reference no: EM132563180

Phen Ltd. issued 500,000 common shares of $10 at par and paid $1,000,000 for the net assets of Sung Ltd. on August 17, 2014. The market value of Phen Ltd.'s stocks was $20 per share at the time. Sung Ltd. was dissolved immediately after the acquisition. The information related to Sung Ltd.'s net assets is as follows (in thousands):

                               Book Value                           Fair Value

Cash                            $ 2,000                              $ 2,000

Trade receivables                800                                    600

Inventories                      3,200                                 3,000

Prepaid expenses                 1,000                             1,000

Land                                  6,000                             6,800

Building-net                        10,000                             10,100

Equipment-net                     3,500                             3,000

Trade payable                      1,300                             1,500

Notes payable                        4,300                            4,600

Bonds payable                        6,600                          7,100

Common stock, $5 par   5,300

Retained Earnings         9,000

REQuIRED:

Question 1: How to Prepare the necessary journal entries for the acquisition.