On January 1, 2021, Foster Corporation issues 1,200,000 shares of Its common stock for all of Evan Corporation's outstanding shares and Evan is dissolved. The fair value of Foster's common stock on that date is 126 per share. The book values and fair values of the accounts for each corporation at December 31, 2020 are as follows: Foster Company Book Value Evan Corporation Fair Value Book Value Fair Value Assets $ 25,000,000 5,000,000 $ 25,000,000 5,000,000 8,000,000 $ 100,000,000 $ 100,000,000 20,000,000 25,000,000 9,000,000 110,000,000 Cash Accounts receivable - net 20,000,000 20,000,000 10,000,000 150,000,000 45,000,000 S 255,000,000 Inventory 10,000,000 7,000,000 20,000,000 5,000,000 $ 62,000,000 Land 9,000,000 19,000,000 Buildings Accumulated depreciation Total assets Liabilities and Stockholders' Equity Accounts payable Notes payable Common stock ($10 par) Additional paid-in capital Retained earnings Total equities $ 14,000,000 10,000,000 $ 14,000,000 11,500,000 $ 30,000,000 $ 30,000,000 100,000,000 90,000,000 10,000,000 25,000,000 S 255,000,000 97.500,000 15,000,000 5,000,000 18,000,000 $ 62,000,000 Required: Prepare (a) the journal entry to record the business combination and (b) the balance sheet (in good form) of Foster Company on January 1, 2021 under the purchase method.
On January 1, 2021, Foster Corporation issues 1,200,000 shares of Its common stock for all of Evan Corporation's outstanding shares and Evan is dissolved. The fair value of Foster's common stock on that date is 126 per share. The book values and fair values of the accounts for each corporation at December 31, 2020 are as follows: Foster Company Book Value Evan Corporation Fair Value Book Value Fair Value Assets $ 25,000,000 5,000,000 $ 25,000,000 5,000,000 8,000,000 $ 100,000,000 $ 100,000,000 20,000,000 25,000,000 9,000,000 110,000,000 Cash Accounts receivable - net 20,000,000 20,000,000 10,000,000 150,000,000 45,000,000 S 255,000,000 Inventory 10,000,000 7,000,000 20,000,000 5,000,000 $ 62,000,000 Land 9,000,000 19,000,000 Buildings Accumulated depreciation Total assets Liabilities and Stockholders' Equity Accounts payable Notes payable Common stock ($10 par) Additional paid-in capital Retained earnings Total equities $ 14,000,000 10,000,000 $ 14,000,000 11,500,000 $ 30,000,000 $ 30,000,000 100,000,000 90,000,000 10,000,000 25,000,000 S 255,000,000 97.500,000 15,000,000 5,000,000 18,000,000 $ 62,000,000 Required: Prepare (a) the journal entry to record the business combination and (b) the balance sheet (in good form) of Foster Company on January 1, 2021 under the purchase method.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Please answer required a and b
Transcribed Image Text:On January 1, 2021, Foster Corporation issues 1,200,000 shares of its common stock for all of Evan
Corporation's outstanding shares and Evan is dissolved. The fair value of Foster's common stock
on that date is 126 per share. The book values and fair values of the accounts for each corporation
at December 31, 2020 are as follows:
Foster Company
Evan Corporation
Book Value
Book Value
Fair Value
Fair Value
Assets
$ 100,000,000
20,000,000
20,000,000
10,000,000
150,000,000
-45,000,000
$ 255,000,000
Cash
$ 100,000,000
$ 25,000,000
5,000,000
8,000,000
9,000,000
19,000,000
$ 25,000,000
5,000,000
Accounts receivable - net
20,000,000
25,000,000
9,000,000
110,000,000
Inventory
Land
10,000,000
7,000,000
20,000,000
5,000,000
$ 62,000,000
Buildings
Accumulated depreciation
Total assets
Liabilities and Stockholders' Equity
Accounts payable
Notes payable
Common stock ($10 par)
Additional paid-in capital
Retained earnings
Total equities
$ 14,000,000
11,500,000
$ 30,000,000
$ 30,000,000
97,500,000
$ 14,000,000
10,000,000
15,000,000
5,000,000
18,000,000
$ 62,000,000
100,000,000
90,000,000
10,000,000
25,000,000
S 255,000,000
Required: Prepare (a) the journal entry to record the business combination and (b) the balance
sheet (in good form) of Foster Company on January 1, 2021 under the purchase method.
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