Question: On January 1 2012 Pruitt Company issued 30 000 shares of

On January 1, 2012, Pruitt Company issued 30,000 shares of its $2 par value common stock for the net assets of Shah Company in a statutory merger accounted for as a purchase. Pruitt’s common stock had a fair value of $28 per share at that time. A schedule of the Shah Company assets acquired and liabilities assumed at book values (which are equal to their tax bases) and fair values follows:

Additional Information:
1. Pruitt’s income tax rate is 35%.
2. Shah’s beginning inventory was all sold during 2012.
3. Useful lives for depreciation and amortization purposes are:
Plant assets...... 10 years
Patents ...... 8 years
Bond premium.... 10 years
4. Pruitt uses the straight-line method for all depreciation and amortization purposes.

A. Prepare the entry on Pruitt Company’s books to record the acquisition of the assets and assumption of the liabilities of Shah Company.
B. Assuming Pruitt Company had taxable income of $468,000 in 2012, prepare the income tax entry for2012.
View Solution:

Sale on SolutionInn
  • CreatedMarch 13, 2015
  • Files Included
Post your question