Separate balance sheets of Pellman Corporation and Shire Company on May 31 20X1, together with fair values of Shire's identifiable net assets, is as follows: Pellman Corporation and Shire Company Separate Balance Sheets (prior to business combination) May 31, 20X1 Pellman Shire Shire Corporation Carry Value Fair Value Asserts $550,000 700,000 1,400,000 2,850,000 $5,500,000 $10,000 60,000 140,000 690,000 Cash Trade accounts Receivable (net) Inventories Plant Assets(net) Total Assets Liabilities and Stockholders Equity Current Liabilities Long Term Debt Common Stock $10 par Additional Paid in Capital Retained Earnings Total Liabilities and stockholders Equity $10,000 60,000 120,000 610,000 $800,000 $80,000 440,000 $500,000 1,000,000 1,500,000 1,200,000 1,300,000 $5,500,000 $80,000 400,000 100,000 40,000 180,000 $800,000 On May 31, 20X1, Pellman acquired all 10,000 shares if Shire's outstanding common stock by paying $300,000 cash to Shire's stockholders and $50,000 cash for finders and legal fees related to the business combination. Instructions: a. Prepare journal entries for Pellman to record the business combination with Shire on May 31, 20X1. b. Prepare the working paper for the consolidated balance sheet of Pellman Corporation and subsidiary on May 31, 20X1.
Separate balance sheets of Pellman Corporation and Shire Company on May 31 20X1, together with fair values of Shire's identifiable net assets, is as follows: Pellman Corporation and Shire Company Separate Balance Sheets (prior to business combination) May 31, 20X1 Pellman Shire Shire Corporation Carry Value Fair Value Asserts $550,000 700,000 1,400,000 2,850,000 $5,500,000 $10,000 60,000 140,000 690,000 Cash Trade accounts Receivable (net) Inventories Plant Assets(net) Total Assets Liabilities and Stockholders Equity Current Liabilities Long Term Debt Common Stock $10 par Additional Paid in Capital Retained Earnings Total Liabilities and stockholders Equity $10,000 60,000 120,000 610,000 $800,000 $80,000 440,000 $500,000 1,000,000 1,500,000 1,200,000 1,300,000 $5,500,000 $80,000 400,000 100,000 40,000 180,000 $800,000 On May 31, 20X1, Pellman acquired all 10,000 shares if Shire's outstanding common stock by paying $300,000 cash to Shire's stockholders and $50,000 cash for finders and legal fees related to the business combination. Instructions: a. Prepare journal entries for Pellman to record the business combination with Shire on May 31, 20X1. b. Prepare the working paper for the consolidated balance sheet of Pellman Corporation and subsidiary on May 31, 20X1.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Separate balance sheets of Pellman Corporation and Shire Company on May 31 20X1, together with fair
values of Shire's identifiable net assets, is as follows:
Pellman Corporation and Shire Company
Separate Balance Sheets (prior to business combination)
May 31, 20X1
Pellman
Shire
Shire
Fair Value
Corporation
Carry Value
Asserts
$550,000
700,000
1,400,000
$10,000
60,000
140,000
Cash
Trade accounts Receivable (net)
Inventories
Plant Assets(net)
Total Assets
Liabilities and Stockholders Equity
Current Liabilities
Long Term Debt
Common Stock $10 par
Additional Paid in Capital
Retained Earnings
Total Liabilities and stockholders Equity
$10,000
60,000
120,000
2,850,000
$5,500,000
610,000
$800,000
690,000
$500,000
1,000,000
1,500,000
1,200,000
1,300,000
$5,500,000
$80,000
400,000
100,000
40,000
$80,000
440,000
180,000
$800,000
On May 31, 20X1, Pellman acquired all 10,000 shares if Shire's outstanding common stock by paying
$300,000 cash to Shire's stockholders and $50,000 cash for finders and legal fees related to the business
combination.
Instructions:
a. Prepare journal entries for Pellman to record the business combination with Shire on May 31,
20X1.
b. Prepare the working paper for the consolidated balance sheet of Pellman Corporation and
subsidiary on May 31, 20X1.
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