Reference no: EM132652733
Question - On December 31, Year 1, META Company (the combiner) was merged into SAXON Corporation (the combiner or surviving company). Both companies used the same accounting principles for assets, liabilities, revenue, and expenses and both had a December 31 fiscal year. SAXON exchanged 150,000 shares of its Br 10 par common stock (Current Fair Value Br 30 a share) for all 100,000 issued and outstanding shares of META's no-par, Br 10 stated value common stock. In addition, Saxon paid the following out-of-pocket costs associated with the business combination:
Accounting fees:
For investigation of META Company as prospective combine Br 5,000
For SEC registration statement for Saxon common stock 60,000
Legal Fees:
For the business combination 10,000
For SEC registration statement for Saxon common stock 50,000
Finder's fee 51,250
Printing charges for securities and SEC registration statement 23,000
SEC registration statement fee 750
Total out -of- pocket costs of business combination 200,000
There was no contingent consideration in the merger contract. Immediately prior to the merger, META Company's condensed balance sheet was as follows:
META COMPANY (Combiner) Balance sheet (Prior to Business Combination) December 31, Year 1
Assets:
Current assets Br1,000,000
Plant assets (net) 3,100,000
Other assets 600,000
Total assets 4,700,000
Liabilities & Stockholder Equity:
Current liabilities 500,000
Long-term debt 1,100,000
Common stock, no par Br 10 stated value 1,000,000
Paid in capital 700,000
Retained Earnings 1,400,000
Total 4,700,000
Using the guidelines in SFAS No. 141, "Business Combinations," the board of directors of Saxon Corporation determined the current fair values of META Company's identifiable assets and liabilities (identifiable net assets) as follows:
Current asset Br1,150,000
Plant assets 3,400,000
Other assets 600,000
Current liabilities (500,000)
Long-term debt (present value) (1,200,000)
The condensed journal entries that follow are required for SAXON Corporation (the Combiner) to record the Merger with META Company on December 31, Year 1, as a Purchase-type business combination.
Instructions -
1. Record the acquisitions of Meta Company.
2. Record payment of out-of- pocket cost of business combinations.
3. Determine total cost of acquiring company of Saxon.
4. Determine the total goodwill.