Reference no: EM135922
Purchase Effective 31st December, 2010, Zintel Corporation proposes to issue extra shares of its common stock in exchange for all the liabilities and assets of Smith Corporation and Platz Corporation, after which Platz and Smith will distribute the Zintel stock to their stockholders in do liquidation and dissolution. Balance sheets of each of the corporation's immediately prior to merger on 31st December, 2010, follow. The common stock exchange ratio was negotiated to be 1:1 for both Platz and Smith.
Zintel Smith Platz existing assets $1,600,000 $ 350,000 $ 12,000
Long-term assets (net) 5,700,000 1,890,000 98,000
Total $7,300,000 $2,240,000 $110,000
Current liabilities $700,000 $110,000 $9,000
Long-term debt 1,100,000 430,000 61,000
Common stock, $5 par value 2,500,000 700,000 20,000
Retained earnings 3,000,000 1,000,000 20,000
Total $7,300,000 $2,240,000 $110,000
Required:
Organize journal entries on Zintel's books to record the combination. Suppose the following: The identifiable assets and liabilities of Platz and Smith are all reflected in the balance sheets, and their recorded amounts are same to their current fair values except for long-term assets. The fair value of Smith's long-term assets exceeds their book value by $20,000, and the fair value of Platz's long-term assets exceeds their book values by $5,000. Zintel's common stock is traded dynamically and has a current market price of $15 per share. Prepare journal entries on Zintel's books to record the combination.