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Question - Journal Entries
On January 1, 20x3 Pure Products Corporation issued 12,000 shares of its $10 par value stock to acquire the net assets of Light Steel Company. Underlying book value and fair value information for the balance sheet items of Light Steel at the time of acquisition follow:
Balance Sheet Item
Book value
Fair Value
cash
$60,000
Accounts Receivable
100,000
Inventory (LIFO basis)
60,000
115,000
Land
50,000
70,000
Buildings & Equipment
400,000
350,000
Less: Accumulated Depreciation
(150,000)
0
total Assets
$520,000
$695,000
Accounts Payable
$10,000
Bonds Payable
200,000
180,000
common Stock($5 par value)
150,000
Additional paid-in capital
Retained Earnings
90,000
Total Liabilities and Equities
Light Steel share were selling at $18 and PURE Products share were selling at $50 just before the merger announcement. Additional cash payments made by PURE Products in completing the acquisition were
finder's fee paid to firm that located light Steel
Audit fee for stock issued by Pure Products
3,000
Stock registration fee for new share of Pure Products
5,000
Legal fees paid to assist in transfer of net assets
9,000
cost of SEC registration of PURE Products shares
1,000
Required - Prepare all journal entries to record the business combination on PURE Products books.
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