On January 1, 2020, Jack and Jill Companies had condensed balance sheets as shown below: ​ Jack Jill ​ Company Company Current Assets $1,000,000 $ 500,000 Plant and Equipment (Net) 1,500,000 900,000 ​ $2,500,000 $1,400,000   ​ ​ Current Liabilities $ 200,000 $ 175,000 Long-Term Debt 300,000 200,000 Common Stock, $5 par 1,400,000 400,000 Paid-in Capital in Excess of Par 0 125,000 Retained Earnings 600,000 500,000 ​ $2,500,000 $1,400,000 ​ Required: ​ Record the acquisition of Jill’s net assets, the issuance of the stock and/or payment of cash, and payment of the related costs. Assume that Jack issued 60,000 shares of new common stock with a fair value of $15 per share and paid $400,000 cash for all of the net assets of Jill. Acquisition costs of $25,000 and stock issuance costs of $10,000 were paid in cash. Current assets had a fair value of $525,000, plant and equipment had a fair value of $1,000,000, and long-term debt had a fair value of $190,000.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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  1. On January 1, 2020, Jack and Jill Companies had condensed balance sheets as shown below:

Jack

Jill

Company

Company

Current Assets

$1,000,000

$ 500,000

Plant and Equipment (Net)

1,500,000

900,000

$2,500,000

$1,400,000

 

Current Liabilities

$ 200,000

$ 175,000

Long-Term Debt

300,000

200,000

Common Stock, $5 par

1,400,000

400,000

Paid-in Capital in Excess of Par

0

125,000

Retained Earnings

600,000

500,000

$2,500,000

$1,400,000

Required:

Record the acquisition of Jill’s net assets, the issuance of the stock and/or payment of cash, and payment of the related costs. Assume that Jack issued 60,000 shares of new common stock with a fair value of $15 per share and paid $400,000 cash for all of the net assets of Jill. Acquisition costs of $25,000 and stock issuance costs of $10,000 were paid in cash. Current assets had a fair value of $525,000, plant and equipment had a fair value of $1,000,000, and long-term debt had a fair value of $190,000.

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