Bigtime Industries Inc. entered into a business combination agreement with Hydrolized Chemical Corporation (HCC) to ensure an uninterrupted supply of key raw materials and to realize certain economies from combining the operating processes and the marketing efforts of the two companies. Under the terms of the agreement, Bigtime issued 180,000 shares of its $1 par common stock in exchange for all of HCC's assets and liabilities. The Bigtime shares then were distributed to HCC's shareholders, and HCC was liquidated.

Immediately prior to the combination, HCC's balance sheet appeared as follows, with fair values also indicated:

Immediately prior to the combination, Bigtime's common stock was selling for $14 per share. Bigtime incurred direct costs of $135,000 in arranging the business combination and $42,000 of costs associated with registering and issuing the common stock used in the combination.

Required

a. Prepare all journal entries that Bigtime should have entered on its books to record the business combination.

b. Present all journal entries that should have been entered on HCC's books to record the combination and the distribution of the stock received.

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Book Values Fair Values Assets Cash Accounts Receivable Less: Allowance for Bad Debts Inventory Long-Term Investments Land Rolling Stook Plant & Equipment Less: Accumulated Depreciation Patents Special Licenses Total Assets S 28,000 251,500 28,000 258,000 (6,500) 381,000 150,000 55,000 130,000 2,425,000 (614,000) 125,000 95,800 $3,027,300 395,000 175,000 100,000 63,000 2,500,000 2 500,000 100,000 54.112,500 Book Values Fair Values Liabilities Current Payables Mortgages Payable Equipment Trust Notes Debentures Payable Less: Discount on Debentures Total Liabilities $137,200 500,000 100,000 1,000,000 (40,000) $1,697,200 137,200 520,000 95,000 950,000 $1,702,200 Stockholders' Equity Common Stock ($5 par) Additional Paid-In Capital from Common Stock Additional Paid-In Capital from 600,000 500,000 Retirement of Preferred Stock Retained Earnings Less: Treasury Stock (1,500 shares) Total Liabilities & Equity 22,000 220,100 (12,000) $3,027,300