Condensed balance sheets for Phillips Company and Solina Company on January 1, 2013, are as follows: Phillips Solina Current assets $164,340 $89,490 Plant and equipment (net) 482,600 150,090 Total assets $646,940 $239,580 Total liabilities $88,220 $31,550 Common stock, $10 par value 337,200 171,950 Other contributed capital 120,680 47,820 Retained earnings (deficit) 100,840 (11,740 ) Total liabilities and equities $646,940 $239,580 On January 1, 2013, the stockholders of Phillips and Solina agreed to a consolidation. Because FASB requires that one party be recognized as the acquirer and the other as the acquiree, it was agreed that Phillips was acquiring Solina. Phillips agreed to issue 19,880 shares of its $10 par stock to acquire all the net assets of Solina at a time when the fair value of Phillips’ common stock was $16 per share. On the date of consolidation, the fair values of Solina’s current assets and liabilities were equal to their book values. The fair value of plant and equipment was, however, $160,500. Phillips will incur $20,750 of direct acquisition costs and $5,420 in stock issue costs. Prepare the journal entries on the books of Phillips to record the acquisition of Solina Company’s net assets. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit Acquisition Costs Expense Cash Common Stock Current Assets Goodwill Liabilities No Entry Other Contributed Capital Plant and Equipment Acquisition Costs Expense Cash Common Stock Current Assets Goodwill Liabilities No Entry Other Contributed Capital Plant and Equipment Acquisition Costs Expense Cash Common Stock Current Assets Goodwill Liabilities No Entry Other Contributed Capital Plant and Equipment Acquisition Costs Expense Cash Common Stock Current Assets Goodwill Liabilities No Entry Other Contributed Capital Plant and Equipment Acquisition Costs Expense Cash Common Stock Current Assets Goodwill Liabilities No Entry Other Contributed Capital Plant and Equipment Acquisition Costs Expense Cash Common Stock Current Assets Goodwill Liabilities No Entry Other Contributed Capital Plant and Equipment (To record assets and liabilities acquired) Acquisition Costs Expense Cash Common Stock Current Assets Goodwill Liabilities No Entry Other Contributed Capital Plant and Equipment Acquisition Costs Expense Cash Common Stock Current Assets Goodwill Liabilities No Entry Other Contributed Capital Plant and Equipment (To record the direct acquisition costs) Acquisition Costs Expense Cash Common Stock Current Assets Goodwill Liabilities No Entry Other Contributed Capital Plant and Equipment Acquisition Costs Expense Cash Common Stock Current Assets Goodwill Liabilities No Entry Other Contributed Capital Plant and Equipment (To record the stock issue costs)

Condensed balance sheets for Phillips Company and Solina Company on January 1, 2013, are as follows: Phillips Solina Current assets $164,340 $89,490 Plant and equipment (net) 482,600 150,090 Total assets $646,940 $239,580 Total liabilities $88,220 $31,550 Common stock, $10 par value 337,200 171,950 Other contributed capital 120,680 47,820 Retained earnings (deficit) 100,840 (11,740 ) Total liabilities and equities $646,940 $239,580 On January 1, 2013, the stockholders of Phillips and Solina agreed to a consolidation. Because FASB requires that one party be recognized as the acquirer and the other as the acquiree, it was agreed that Phillips was acquiring Solina. Phillips agreed to issue 19,880 shares of its $10 par stock to acquire all the net assets of Solina at a time when the fair value of Phillips’ common stock was $16 per share. On the date of consolidation, the fair values of Solina’s current assets and liabilities were equal to their book values. The fair value of plant and equipment was, however, $160,500. Phillips will incur $20,750 of direct acquisition costs and $5,420 in stock issue costs. Prepare the journal entries on the books of Phillips to record the acquisition of Solina Company’s net assets. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit Acquisition Costs Expense Cash Common Stock Current Assets Goodwill Liabilities No Entry Other Contributed Capital Plant and Equipment Acquisition Costs Expense Cash Common Stock Current Assets Goodwill Liabilities No Entry Other Contributed Capital Plant and Equipment Acquisition Costs Expense Cash Common Stock Current Assets Goodwill Liabilities No Entry Other Contributed Capital Plant and Equipment Acquisition Costs Expense Cash Common Stock Current Assets Goodwill Liabilities No Entry Other Contributed Capital Plant and Equipment Acquisition Costs Expense Cash Common Stock Current Assets Goodwill Liabilities No Entry Other Contributed Capital Plant and Equipment Acquisition Costs Expense Cash Common Stock Current Assets Goodwill Liabilities No Entry Other Contributed Capital Plant and Equipment (To record assets and liabilities acquired) Acquisition Costs Expense Cash Common Stock Current Assets Goodwill Liabilities No Entry Other Contributed Capital Plant and Equipment Acquisition Costs Expense Cash Common Stock Current Assets Goodwill Liabilities No Entry Other Contributed Capital Plant and Equipment (To record the direct acquisition costs) Acquisition Costs Expense Cash Common Stock Current Assets Goodwill Liabilities No Entry Other Contributed Capital Plant and Equipment Acquisition Costs Expense Cash Common Stock Current Assets Goodwill Liabilities No Entry Other Contributed Capital Plant and Equipment (To record the stock issue costs)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Condensed balance sheets for Phillips Company and Solina Company on January 1, 2013, are as follows:

	Phillips	Solina
Current assets	$164,340	$89,490
Plant and equipment (net)	482,600	150,090
Total assets	$646,940	$239,580

Total liabilities	$88,220	$31,550
Common stock, $10 par value	337,200	171,950
Other contributed capital	120,680	47,820
Retained earnings (deficit)	100,840	(11,740	)
Total liabilities and equities	$646,940	$239,580

On January 1, 2013, the stockholders of Phillips and Solina agreed to a consolidation. Because FASB requires that one party be recognized as the acquirer and the other as the acquiree, it was agreed that Phillips was acquiring Solina. Phillips agreed to issue 19,880 shares of its $10 par stock to acquire all the net assets of Solina at a time when the fair value of Phillips’ common stock was $16 per share.

On the date of consolidation, the fair values of Solina’s current assets and liabilities were equal to their book values. The fair value of plant and equipment was, however, $160,500. Phillips will incur $20,750 of direct acquisition costs and $5,420 in stock issue costs.

Prepare the journal entries on the books of Phillips to record the acquisition of Solina Company’s net assets. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

Account Titles and Explanation	Debit	Credit
Acquisition Costs Expense Cash Common Stock Current Assets Goodwill Liabilities No Entry Other Contributed Capital Plant and Equipment
Acquisition Costs Expense Cash Common Stock Current Assets Goodwill Liabilities No Entry Other Contributed Capital Plant and Equipment
Acquisition Costs Expense Cash Common Stock Current Assets Goodwill Liabilities No Entry Other Contributed Capital Plant and Equipment
Acquisition Costs Expense Cash Common Stock Current Assets Goodwill Liabilities No Entry Other Contributed Capital Plant and Equipment
Acquisition Costs Expense Cash Common Stock Current Assets Goodwill Liabilities No Entry Other Contributed Capital Plant and Equipment
Acquisition Costs Expense Cash Common Stock Current Assets Goodwill Liabilities No Entry Other Contributed Capital Plant and Equipment
(To record assets and liabilities acquired)
Acquisition Costs Expense Cash Common Stock Current Assets Goodwill Liabilities No Entry Other Contributed Capital Plant and Equipment
Acquisition Costs Expense Cash Common Stock Current Assets Goodwill Liabilities No Entry Other Contributed Capital Plant and Equipment
(To record the direct acquisition costs)
Acquisition Costs Expense Cash Common Stock Current Assets Goodwill Liabilities No Entry Other Contributed Capital Plant and Equipment
Acquisition Costs Expense Cash Common Stock Current Assets Goodwill Liabilities No Entry Other Contributed Capital Plant and Equipment
(To record the stock issue costs)

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