The financial statements for Joe Inc. and Lorens Corp., just prior to their combination, for the year endingDecember 31, 2017, follow. Lorens's buildings were undervalued on its financial records by $60,000.Joe Inc Lorens Inc$ $Revenues 1,300,000 500,000Expenses (1,180,000) (290,000)Net income 120,000 210,000Retained earnings, January 1, 2017 700,000 500,000Net income (from above) 120,000 210,000Dividends declared (110,000) (110,000)Retained earnings, December 31, 2017 710,000 600,000Cash 160,000 120,000Receivables and inventory 240,000 240,000Buildings (net) 700,000 350,000Equipment (net) 700,000 600,000Total assets 1,800,000 1,310,000Liabilities 250,000 195,000Common stock 750,000 430,000Additional paid-in capital 90,000 85,000Retained earnings, 12/31/17 710,000 600,000Total liabilities and stockholders’ equity 1,800,000 1,310,000On December 31, 2017, Joe issued 54,000 new shares of its $10 par value stock in exchange for all the outstandingshares of Lorens. Joe's shares had a fair value on that date of $35 per share. Joe paid $34,000 to an investmentbank for assisting in the arrangements. Joe also paid $24,000 in stock issuance costs to effect the acquisition ofLorens. Lorens will retain its incorporation.Required:a. Prepare the journal entries to record: (1) the issuance of stock by Joe; and (2) the payment of thecombination costs.b. Determine consolidated net income for the year ended December 31, 2017.c. Determine consolidated Additional Paid-In Capital at December 31, 2017
The financial statements for Joe Inc. and Lorens Corp., just prior to their combination, for the year ending
December 31, 2017, follow. Lorens's buildings were undervalued on its financial records by $60,000.
Joe Inc Lorens Inc
$ $
Revenues 1,300,000 500,000
Expenses (1,180,000) (290,000)
Net income 120,000 210,000
Net income (from above) 120,000 210,000
Dividends declared (110,000) (110,000)
Retained earnings, December 31, 2017 710,000 600,000
Cash 160,000 120,000
Receivables and inventory 240,000 240,000
Buildings (net) 700,000 350,000
Equipment (net) 700,000 600,000
Total assets 1,800,000 1,310,000
Liabilities 250,000 195,000
Common stock 750,000 430,000
Additional paid-in capital 90,000 85,000
Retained earnings, 12/31/17 710,000 600,000
Total liabilities and
On December 31, 2017, Joe issued 54,000 new shares of its $10 par value stock in exchange for all the outstanding
shares of Lorens. Joe's shares had a fair value on that date of $35 per share. Joe paid $34,000 to an investment
bank for assisting in the arrangements. Joe also paid $24,000 in stock issuance costs to effect the acquisition of
Lorens. Lorens will retain its incorporation.
Required:
a. Prepare the
combination costs.
b. Determine consolidated net income for the year ended December 31, 2017.
c. Determine consolidated Additional Paid-In Capital at December 31, 2017
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