On 1/1/X2, Peanut enters into a business combination with Strawberry in which Strawberry is dissolved. Peanut issues 30,000 shares of its stock in exchange for all of the outstanding stock of Strawberry. In addition, Peanut pays the following costs in cash at the time of the merger:

Cost of printing stock certificates	$ 8,000
Finders’ Fee	45,000
Legal fees to negotiate merger terms	10,000
Accountant’s fee for preparation of stock registration statement	40,000
Total	$103,000

At the time of the stock issue, Peanut’s shares were selling for $18 per share and Strawberry’s shares were selling for $15 per share.

Balance sheets and fair value information for the two companies on December 31, X1 were as follows:

Assets:	Peanut Book Value	Peanut Fair Value	Strawberry Book Value	Strawberry Fair Value
Cash	$ 380,000	$ 380,000	$ 80,000	$ 80,000
Inventory	920,000	1,000,000	180,000	210,000
Land	300,000	400,000	100,000	120,000
Buildings	600,000	800,000	300,000	200,000
Equipment	400,000	500,000	100,000	100,000
Patents	200,000	300,000	0	180,000
Total Assets	$2,800,000	$3,380,000	$ 760,000	$890,000
Liabilities & Equity:
Notes Payable	$ 900,000	$1,000,000	$ 240,000	$220,000
Capital Stock, $10 par	800,000		300,000
Additional Paid In Capital	600,000		50,000
Retained Earnings	500,000		170,000
Total Liabilities & Equity	$2,800,000		$ 760,000

Required:

Prepare the necessary journal entries on Peanut’s books to record the merger assuming that Strawberry is dissolved (Hint: there are 3 journal entries)

Answer rating: 100% (QA)

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