Chapter 1, Problem 1.36P

Business Combination
Following are the balance sheets of Power Boogie Musical Corporation and Shoot-Toot TubaCompany as of December 31, 20X5.

In preparation for a possible business combination, a team of experts from Power BoogieMusical made a thorough examination and audit of Shoot-Toot Tuba. They found that Shoot-Toot’s assets and liabilities were correctly stated except that they estimated uncollectibleaccounts at $1,400. The experts also estimated the market value of the inventory at $35,000and the market value of the plant and equipment at $500,000. The business combination tookplace on January 1, 20X6, and on that date Power Boogie’s Musical acquired all the assets andliabilities of Shoot-Toot Tuba. On that date, Power Boogie’s common stock was selling for$55 per share.
Required
Record the combination on Power Boogie’s books assuming that Power Boogie issued 9,000 of its
$10 par common shares in exchange for Shoot-Toot’s assets and liabilities.