Prepare balance sheet after an acquisition
On January 2, 2011, Pet Corporation enters into a business combination with Sea Corporation in which Sea is dissolved. Pet pays $1,650,000 for Sea, the consideration consisting of 66,000 shares of Pet $10 par common stock with a market value of $25 per share. In addition, Pet pays the following expenses in cash at the time of the merger:
|
Finders’ fee |
$ 70,000 |
|
Accounting and legal fees |
130,000 |
|
Registration and issuance costs of securities |
80,000 |
|
$280,000 |
Balance sheet and fair value information for the two companies on December 31, 2010, immediately before the merger, is as follows (in thousands):
|
Pet Book Value |
Sea Book Value |
Sea Fair Value |
|
|
Cash |
$ 300 |
$ 60 |
$ 60 |
|
Accounts receivable—net |
460 |
100 |
80 |
|
Inventories |
1,040 |
160 |
240 |
|
Land |
800 |
200 |
300 |
|
Buildings—net |
2,000 |
400 |
600 |
|
Equipment—net |
1,000 |
600 |
500 |
|
Total assets |
$5,600 |
$1,520 |
$1,780 |
|
Accounts payable |
$ 600 |
$ 80 |
$ 80 |
|
Note payable |
1,200 |
400 |
360 |
|
Capital stock, $10 par |
1,600 |
600 |
|
|
Other paid in capital |
1,200 |
100 |
|
|
Retained earnings |
1,000 |
340 |
|
|
Total liabilities and owners’ equity |
$5,600 |
$1,520 |
REQUIRED : Prepare a balance sheet for Pet Corporation as of January 2, 2011, immediately after the merger, assuming the merger is treated as an acquisition.