question archive At January 1, Danders Corporation pays $200,000 cash and also issue 18,000 shares of $10 par common stock with a market value $330,000 for all the outstanding common shares of Harrison Corporation
At January 1, Danders Corporation pays $200,000 cash and also issue 18,000 shares of $10 par common stock with a market value $330,000 for all the outstanding common shares of Harrison Corporation
Subject:AccountingPrice:3.86 Bought7
At January 1, Danders Corporation pays $200,000 cash and also issue 18,000 shares of $10 par common stock with a market value $330,000 for all the outstanding common shares of Harrison Corporation. In addition, Danders pays $30,000 for registering and issuing the 18,000 shares and $70,000 for the other direct costs of the business combination Summarized balance sheet information for the companies immediately before the merger is as follows (in thousands) :
Danders Harrison Harrison
Book Value Book Value Fair Value
Cash $ 350,000 $40,000 $ 40,000
Inventories 120,000 80,000 100,000
Other current assets 30,000 20,000 20,000
Plant assets-net 260,000 180,000 280,000
Total Assets $,760,000 $ 320,000 $ 440,000
Current liabilities $160,000 $30,000 $ 30,000
Other liabilities 80,000 50,000 40,000
Common stock, $ 10 par 420,000 200,000
Retained Earnings 100,000 40,000
Total Liabi & Equities $760,000 $ 320,000
Required:
1) Prepare Dander's general journal entry for the acquisition of Harrison, assuming that
Harrison dissolves as a separate legal entity. (6pts)
2) Prepare Dander's general journal entry for the acquisition of Harrison assuming that
Harrison continues as a separate legal entity (6pts
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1. Acquisition of Merger
Inventories - 100,000
Other current assets - 20,000
Goodwill - 440,000
Current Liabilities - 30,000
Other liabilities - 40,000
Common Stock - 150,000
Share Premium - 180,000
Cash - 160,000*
(200,000 invested - 40,000 existing cash of the subsidiary)
(All assets and liabilities will be transferred to the surviving entity upon merger.)
Retained Earnings - 70,000
Share Premium - 30,000
Cash - 100,000
( To record the initial direct costs and share issuance costs.)
2. Consolidation
Investment in Harrison - 600,000
Cash - 300,000*
Common Stock - 150,000
Share Premium - 150,000*
* (200,000 Cash +100,000 initial direct costs)
* (180,000 Share Premium -30,000 issuance costs)
* ( Two entities still remain but upon consolidation they will be presented as one. For purposes of separate FS, the investment account is recorded by the parent.)
