Galaf Corporation acquired all the net assets of Jalahma Corporation directly from the shareholders by issuing 20,000 shares of its $10 par common stock (current fair value $20 a share). Galaf paid legal fees of $60,000 in connection with the combination.

The condensed balance sheet of Jalahma prior to the business combination, with related current fair value data, is presented below:

	Jalahma Corporation (Combine) Balance Sheet (prior to business combination) December 31,2020
		Carrying Amounts		Current Fair Values
Assets
Current assets		$ 200,000		$ 190,000
Investment in securities		100,000		90,000
Plant assets (net)		520,000		800,000
Intangible assets (net)		20,000		50,000
Total Assets		$ 840,000		$ 1,130,000
Liabilities and Stockholder’s Equity
Current liabilities		$ 300,000		$ 400,000
Long-term debt		60,000		40,000
Total liabilities		$ 360,000		$ 440,000

Common stock, $10 par $ 280,000 Total stockholders’ equity $ 200,000 Total liabilities and stockholders’ equity $ 840,000

Instruction:

1.Calculate the good well. 

2.Prepare journal entries on December 31, 2020, for Galaf Corporation to record the business combination with Jalahma Company. Disregard income taxes. 

Answer rating: 100% (QA)

Fairvalue of assets and liabilities taken over Current ... View the full answer