Recording a pooling with acquisition costs. Grant Corporation has been looking to expand its operations and has decided to acquire the assets of Turner Company and Murray Company. Grant will issue 25,000 shares of its $10 par common stock to acquire the net assets of Turner Company and will issue 12,000 shares to acquire the net assets of Murray Company.
Turner and Murray have the following balance sheets as of December 31, 20X1:
|
Assets |
Turner |
Murray |
|
Accounts receivable |
$200,000 |
$80,000 |
|
Inventory |
150,000 |
85,000 |
|
Property, plant, and equipment: |
||
|
Land |
150,000 |
50,000 |
|
Building |
500,000 |
300,000 |
|
Accumulated depreciation |
150,000 |
110,000 |
|
Total assets |
$850,000 |
$405,000 |
|
Liabilities and Equity |
Turner |
Murray |
|
Current liabilities |
$160,000 |
$55,000 |
|
Bonds payable |
100,000 |
100,000 |
|
Stockholders’ equity: |
||
|
Common stock ($10 par) |
300,000 |
100,000 |
|
Retained earnings |
290,000 |
150,000 |
|
Total liabilities and equity |
$850,000 |
$405,000 |
The following fair values are agreed upon by the two firms:
|
Assets |
Turner |
Murray |
|
Inventory |
$200,000 |
$100,000 |
|
Bonds payable |
80,000 |
95,000 |
|
Land |
200,000 |
60,000 |
|
Buildings |
400,000 |
350,000 |
Grant’s stock is currently trading at $40 per share. Grant will incur $5,000 of direct acquisition costs in Turner and $4,000 of direct acquisition costs in Murray. Grant also incurred $13,000 of indirect acquisition costs and $15,000 of registration and issuance costs. Grant’s stockholders’ equity is as follows:
|
Common stock |
$1,200,000 |
|
Paid in capital in excess of par |
800,000 |
|
Retained earnings |
750,000 |
Required
Record the acquisition on the books of Grant Corporation, using pooling of interests accounting principles.