Question - Merrill acquires 100 percent of the outstanding voting shares of Harriss Company on January 1, 2008. To obtain these shares, Merrill pays $200,000 is cash and issues 10,000 shares of its own $10 par value common stock. On the date, Merrill's stock has a fair value of $18 per share. Merrill paid an additional $6,000 in stock issuance costs.

The book values for both Merrill and Harriss as of January 1, 2008, follow. The fair value of each of Harriss's accounts is also included. In addition, Harriss holds a fully amortized patent that still retains a $30,000 value.

Merrill, Inc Book Values

Cash $300,000

Receivables 160,000

Inventory 220,000

Land 100,000

Buildings(net) 400,000

Equipment(net) 120,000

Accounts payable (160,000)

Long-termliabilities (380,000)

Common stock (400,000)

Retained earnings (360,000)

Harriss Company Book Values Fair Values

Cash $40,000 $40,000

Receivables 90,000 80,000

Inventory 130,000 130,000

Land60,000 60,000

Buildings(net) 110,000 140,000

Equipment(net) 50,000 50,000

Accounts payable (30,000) (30,000)

Long-termliabilities(170,000)(150,000)

Common stock (40,000)

Retained earnings (240,000)

A. Assume that this combination is a statutory merger so that Harriss's accounts are to be transferred to Merrill's records with Harriss subsequently being dissolved as a legal corporation. Prepare the journal entries for Merrill to record this merger.

B. Assume that no dissolution is to take place in connection with this combination. Rather, both companies retain their separate legal identities. Prepare a worksheet to consolidate the two companies as of January 1, 2008.