On June 30, 200X Carl Corporation purchased Lin Company by issuing 50,000 shares of stock. Stock has a market value of $15.00 per share. This acquisition is to be recorded as a statutory merger through asset acquisition. In this type of business combination Carl company acquires all the assets and liabilities of Lin Company. Lin Company is dissolved and goes out of business. Prepare the entries the purchase and combination on June 30, 200X.
Following information is shown prior to the merger activity being recorded:
Carl Company
Assets Liabilities and Capital
Cash $ 80,000 Current Liabilities $ 80,000
Inventories 80,000
Plant 300,000 Common Stock $5PV 10,000
Land 20,000 Additional Paid in Capital 190,000 Retained Earnings 200,000
Total $480,000 Total $480,000
Lin Company
Assets Liabilities and Capital
Cash $200,000 Current Liabilities $100,000
Accounts Receivable 20,000 Common Stock $10PV 150,000
Plant Assets 530,000 Additional Paid in Capital 400,000 Retained Earnings 100,000
Total $750,000 Total $750,000
Other information:
•The Lin Company Plant Assets fair market value is $600,000.
The out of pocket costs of the merger are:
•SEC Registration Statement fee $20,000
•Legal fees for the SEC Registration Statement $15,000
•Accounting fees for the SEC Registration Statement $ 5,000
•Finders Fee $ 6,000
•Legal fees for the merger $ 2,000
•Accounting fees for the merger $ 4,000
1. Prepare and post the entries to record this as a statutory merger. In a statutory merger permanent dissolution of the subsidiary occurs at the combination date.
2. Prepare an after merger balance sheet.