On January 1, 20X3, Pure Products Corporation issued 12,000 shares of its $10 par value stock to acquire the net assets of Steel Company. Underlying book value and fair value information for the balance sheet items of 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
Bond 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
The 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 the transfer of net assets 9,000
Cost of SEC registration of PURE Products shares 1,000
Required:
Prepare all journal entries to record the business combination on PURE Products books.