The account balances for Staten Incorporated and Tacom Corporation on December 31, 2011 are given...

Question:

The account balances for Staten Incorporated and Tacom Corporation on December 31, 2011 are given below:

States Incorporated Book Values at 12/31/2011 Tacom Corporation Book Values at 12/31/2011 Tacom Corporation Fair Values at 12/31/2011
Cash 250,000 50,000 50,000
Receivables 300,000 150,000 140,000
Inventory 450,000 200,000 240,000
Buildings-net 200,000 150,000 190,000
Equipment-net 900,000 600,000 700,000
Trademark 100,000
Accounts payable 200,000 100,000 100,000
Notes payable 1,000,000 450,000 450,000
Common stock 100,000 100,000
Additional paid in capital 300,000 200,000
Retained earnings 1/1/11 300,000 150,000
Revenues 700,000 450,000
Expenses 500,000 300,000

Staten purchased all the outstanding shares of Tacom on December 31, 2011 by issuing 60.000 shares at their $10 par value. Staten paid $10,000 in fees and $5,000 in share issuance costs. These transactions are not included in the account information provided.

Prepare the necessary journal entries in Staten's books if Tacom is dissolved and Staten's per share fair value is $15.

Business Combination

When an entity purchases all the common stock outstanding of the subsidiary,the acquiring company records the assets and liabilities of the acquired company at fair value.

Answer and Explanation:

Account Title Debit Credit
Cash 50,000
Receivables 140,000
Inventory 240,000
Buildings-net 190,000
Equipment-net 700,000
Trademark 100,000
Goodwill 30,000
Accounts payable 100,000
Notes payable 450,000
Common Stocks 600,000
Additional Paid in Capital 300,000
Business Combination Expenses 10,000
Additional Paid in Capital 5,000
Cash 25,000

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