Augusta Inc. acquired 100% of the outstanding common stock of Dear Corporation in a business combination. Immediately before the business combination, the two businesses had the following balance sheets:

Augusta agreed to give Dear's stockholders $1,500 cash in exchange for all their Dear common stock. Dear's equipment has a fair value of $1,100.
Required:
1. Prepare the entries for Augusta and Dear to record the business combination.
2. Prepare the balance sheet of Augusta immediately after the business combination.
3. Prepare the balance sheet of Dear immediately after the business combination.
4. Calculate the amount of the adjustment to the book value of Dear's equity and the amount of goodwill.
5. Prepare a consolidated balance sheet immediately after the combination.

Transcribed Image Text:

Augusta Dear S 3,100 9,500 Cash Equipment (net) Total assets Common stock Retained eamings Total liabilities & equity $ 180 Cash Equipment (net) Total assets Common stock Retained eamings 930 $1,110 S 700 $12,600 $ 9,100 3,500 410 Total liabilities & equity $12,600 S1,110