Pamrod Manufacturing acquired all the assets and liabilities of Stafford Industries on January 1, 20X2, in exchange for 4,100 shares of Pamrod’s $20 par value common stock. Balance sheet data for both companies just before the merger are given as follows: Pamrod Manufacturing Stafford Industries Balance Sheet Items Book Value Fair Value Book Value Fair Value Assets Cash $ 84,000 $ 84,000 $ 30,000 $ 30,000 Accounts Receivable 103,000 103,000 56,000 56,000 Inventory 215,000 376,000 112,000 153,000 Land 59,000 89,000 49,000 26,000 Buildings and Equipment 608,000 542,000 402,000 344,000 Less: Accumulated Depreciation (236,000 ) (141,000 ) Total Assets $ 833,000 $ 1,194,000 $ 508,000 $ 609,000 Liabilities and Equities Accounts Payable $ 66,000 $ 66,000 $ 9,000 $ 9,000 Bonds Payable 314,000 324,000 160,000 144,000 Common Stock: $20 par value 192,000 $5 par value 93,000 Additional Paid-In Capital 37,000 19,000 Retained Earnings 224,000 227,000 Total Liabilities and Equities $ 833,000 $ 508,000 Pamrod shares were selling for $140 on the date of acquisition. Required: Prepare a Journal entry to record the acquisition in Pamrod’s books. Prepare a balance sheet for the combined enterprise immediately following the business combination.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Pamrod Manufacturing acquired all the assets and liabilities of Stafford Industries on January 1, 20X2, in exchange for 4,100 shares of Pamrod’s $20 par value common stock. Balance sheet data for both companies just before the merger are given as follows:

	Pamrod Manufacturing		Stafford Industries
Balance Sheet Items	Book Value	Fair Value		Book Value	Fair Value
Assets
Cash	$	84,000			$	84,000	$	30,000	$	30,000
Accounts Receivable		103,000				103,000		56,000		56,000
Inventory		215,000				376,000		112,000		153,000
Land		59,000				89,000		49,000		26,000
Buildings and Equipment		608,000				542,000		402,000		344,000
Less: Accumulated Depreciation		(236,000	)				(141,000	)
Total Assets	$	833,000			$	1,194,000	$	508,000	$	609,000
Liabilities and Equities
Accounts Payable	$	66,000			$	66,000	$	9,000	$	9,000
Bonds Payable		314,000				324,000		160,000		144,000
Common Stock:
$20 par value		192,000
$5 par value								93,000
Additional Paid-In Capital		37,000						19,000
Retained Earnings		224,000						227,000
Total Liabilities and Equities	$	833,000					$	508,000

Pamrod shares were selling for $140 on the date of acquisition.

Required:

Prepare a Journal entry to record the acquisition in Pamrod’s books.
Prepare a balance sheet for the combined enterprise immediately following the business combination.

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