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Question - The shareholders of Prong Company and Horn Company agreed to a statutory amalgamation under which a share exchange took place. On September 1, Year 5, Prong Company issued 63,000 ordinary shares for all of the ordinary shares of Horn Company, after which Horn Company was dissolved. The ordinary shares of Prong Company traded at $9 per share on this date. After the amalgamation, Prong Company changed its name to Pronghorn Corporation.
The statements of financial position of the two companies on August 31, Year 5, were as follows:
Prong Company
Horn Company
Plant and equipment
$675,000
$509,000
Accumulated depreciation
(225,000)
(209,000)
Other assets
61,000
40,000
Current assets
155,000
190,000
$666,000
$530,000
Ordinary shares (Note 1)
$87,000
$117,000
Retained earnings
263,000
183,000
Long-term debt
200,000
180,000
Current liabilities
116,000
50,000
Note 1 Ordinary shares outstanding
87,000
45,000
The carrying amounts of the net assets of both companies were equal to fair values except for plant and equipment. The fair values of plant and equipment were as follows:
Prong Company $700,000
Horn Company 480,000
Prong's other assets include patent registration costs with a carrying amount of $45,000. An independent appraiser placed a value of $120,000 on this patent.
Required - Prepare the statement of financial position of Pronghorn Corporation immediately after the statutory amalgamation.
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