Journal entries and balance sheet for an acquisition
On January 2, 2011, Par Corporation issues its own $10 par common stock for all the outstanding stock of Sin Corporation in an acquisition. Sin is dissolved. In addition, Par pays $40,000 for registering and issuing securities and $60,000 for other costs of combination. The market price of Par's stock on January 2, 2011, is $60 per share. Relevant balance sheet information for Par and Sin Corporations on December 31, 2010, just before the combination, is as follows (in thousands):
| |
Par Historical Cost
|
Sin Historical Cost
|
Sin Fair Value
|
|
Cash
|
$ 240
|
$ 20
|
$ 20
|
|
Inventories
|
100
|
60
|
120
|
|
Other current assets
|
200
|
180
|
200
|
|
Land
|
160
|
40
|
200
|
|
Plant and equipment-net
|
1,300
|
400
|
700
|
|
Total assets
|
$ 2,000
|
$700
|
$1,240
|
|
Liabilities
|
$ 400
|
$ 100
|
$ 100
|
|
Capital stock, $10 par
|
1,000
|
200
|
|
|
Additional paid-in capital
|
400
|
100
|
|
|
Retained earnings
|
200
|
300
|
|
|
Total liabilities and owners' equity
|
$2,000
|
$700
|
|
REQUIRED
1. Assume that Par issues 25,000 shares of its stock for all of Sin's outstanding shares.
a. Prepare journal entries to record the acquisition of Sin.
b. Prepare a balance sheet for Par Corporation immediately after the acquisition.
2. Assume that Par issues 15,000 shares of its stock for all of Sin's outstanding shares.
a. Prepare journal entries to record the acquisition of Sin.
b. Prepare a balance sheet for Par Corporation immediately after the acquisition.