On January 1, 20x5, Frost Company acquired all of TKK Crop’s assets and liabilit
ID: 2551676 • Letter: O
Question
On January 1, 20x5, Frost Company acquired all of TKK Crop’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. Frost paid merger expense in legal fees for the transfer of assets and liabilities of $12,000. Frost also paid stock issue costs of $15,000 related to the issuance of new shares. Historical cost and fair value balance sheet data for TKK at the time of acquisition were as follows:
Prepare the Journal entries made by Frost to record the business combination.
Balance Sheet ttem Cash and Receivables Irwerntory Buildin&Euipment; Less: Accumulated Depreciation $ (240,000) Total Assets Historical Cost Fair Value $28,000$28.000 $93,CCO$120,CCC $60O,CCO$ 460,CCC $481,000$ 608,CCC $40,000$40,000 $65,0CO$62,CCC Accounts Payable Notes Payable Common Stock ($10 parvalue)$ Retaïned Eanings Total Liabilities & Equity 160,000 $216,0CO $ 481,0coExplanation / Answer
Solution:-
(1) Merger exp A/c Dr. 12000
TO cash 12000
(To record merger exp legal fee)
(2) Deferred Stock issue cost A/c Dr 15000
To Cash 15000
(to record stock issue cost)
(3) Cash A/c Dr. 28000
Inventory Dr 120000
Building Dr 460000
Goodwill Dr 22000
To A/c Payable 40000
To Notes Payable 62000
To common stock 96000
To additional paid up capital 417000
To deferref stock issue cost 15000
(to record merger with TKK)