Acc407 Advanced Accounting: P1-37 On January 1, 20X3, PURE Products Corporation

Acc407 Advanced Accounting
Week 2 Assignment

P1-37 Journal Entries
On January 1, 20X3, PURE Products Corporation issued 12,000 shares of its $10 par value stock to acquire the net assets of Light Steel Company. Underlying book value and fair value information for the balance sheet items of Light Steel at the time of acquisition follow:
Balance Sheet Item Book Value Fair Value
Cash 60,000 60,000
Accounts Receivable 100,000 100,000
Inventory (LIFO basis) 60,000 115,000
Land 50,000 70,000
Buildings and Equipment 400,000 350,000
Less: Accumulated Depreciation (150,000) -
Total Assets 520,000 695,000
Accounts Payable 10,000 10,000
Bonds Payable 200,000 180,000
Common Stock ($5 par value) 150,000
Additional Paid-In Capital 70,000
Retained Earnings 90,000
Total Liabilities and Equities 520,000

Light Steel shares were selling at $18 and PURE Products shares were selling at $50 just before the merger announcement. Additional cash payments made by PURE Products in completing the acquisition were
Finder's fee paid to firm that located Light Steel 10,000
Audit fee for stock issued by PURE Products 3,000
Stock registration fee for new shares of PURE Products 5,000
Legal fees paid to assist in transfer of net assets 9,000
Cost of SEC registration of PURE Products shares 1,000

Prepare all journal entries to record the business combination on PURE Product's books.
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