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Journal Entries to Record a Business Combination
On January 1, 20X2, Frost Company acquired all of TKK Corporation’s assets and liabilities by issuing 24,000 shares of its $4 par value common stock. At that date, Frost shares were selling at $22 per share. Historical cost and fair value balance sheet data for TKK at the time of acquisition were as follows:
|
Balance Sheet Item |
Historical Cost |
Fair Value |
|
Cash & Receivables |
$ 28,000 |
$ 28,000 |
|
Inventory |
94,000 |
122,000 |
|
Buildings & Equipment |
600,000 |
470,000 |
|
Less: Accumulated Depreciation |
(240,000) |
|
|
Total Assets |
$ 482,000 |
$620,000 |
|
Accounts Payable |
$ 41,000 |
$ 41,000 |
|
Notes Payable |
65,000 |
63,000 |
|
Common Stock ($10 par value) |
160,000 |
|
|
Retained Earnings |
216,000 |
|
|
Total Liabilities & Equities |
$ 482,000 |
|
Frost paid legal fees for the transfer of assets and liabilities of $14,000. Frost also paid audit fees of $21,000 and listing application fees of $7,000, both related to the issuance of new shares.
Required
Prepare the journal entries made by Frost to record the business combination.
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