Journal Entries to Record a Business Combination
On January 1, 20X2, Frost Company acquired all of TKK Corporation’s assets and liabilities by issuing 24,000 shares of its $4 par value common stock. At that date, Frost shares were selling at $22 per share. Historical cost and fair value balance sheet data for TKK at the time of acquisition were as follows:
Balance Sheet Item
Historical Cost
Fair Value
Cash & Receivables
$ 28,000
$ 28,000
Inventory
94,000
122,000
Buildings & Equipment
600,000
470,000
Less: Accumulated Depreciation
(240,000)
Total Assets
$ 482,000
$620,000
Accounts Payable
$ 41,000
$ 41,000
Notes Payable
65,000
63,000
Common Stock ($10 par value)
160,000
Retained Earnings
216,000
Total Liabilities & Equities
$ 482,000
Frost paid legal fees for the transfer of assets and liabilities of $14,000. Frost also paid audit fees of $21,000 and listing application fees of $7,000, both related to the issuance of new shares.
Required
Prepare the journal entries made by Frost to record the business combination.
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