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Business, 05.05.2020 08:00 mjackson7208
Condensed balance sheets for Rich Company and Jordan Company on January 1, 2016 are as follows:
Rich
Jordan
Current Assets
$ 440,000
$200,000
Plant and Equipment (net)
1,080,000
340,000
Total Assets
$1,520,000
$540,000
Total Liabilities
$ 230,000
$ 80,000
Common Stock, $10 par value
840,000
240,000
Other Contributed Capital
300,000
130,000
Retained Earnings
150,000
90,000
Total Equities
$1,520,000
$540,000
On January 1, 2016 the stockholders of Rich and Jordan agreed to a consolidation whereby a new corporation, Cannon Company, would be formed to consolidate Rich and Jordan. Cannon Company issued 70,000 shares of its $20 par value common stock for the net assets of Rich and Jordan. On the date of consolidation, the fair values of Rich's and Jordan's current assets and liabilities were equal to their book values. The fair value of plant and equipment for each company was: Rich, $1,270,000; Jordan, $360,000.
An investment banking house estimated that the fair value of Cannon Company's common stock was $35 per share. Rich will incur $45,000 of direct acquisition costs and $15,000 in stock issue costs.
Required:
Prepare the journal entries to record the consolidation on the books of Cannon Company assuming that the consolidation is accounted for as an acquisition.
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Answers: 1
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Condensed balance sheets for Rich Company and Jordan Company on January 1, 2016 are as follows:
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