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.