Parent Inc. issues 1,000,000 common shares for all of the outstanding common shares of Sub Inc on August 1, 2023. The shares issued have a fair market value of $40.

In addition, the merger agreement provides that if the market price of Parent's shares is below $60 one year from the date of the merger, Major will issue additional shares to the former shareholders of Sub Corporation in an amount that will compensate them for their loss of value. Parent predicts that there is a 25% probability that Parent's shares will be trading at $59 per share and a 75% probability that they will be trading at greater than $60 per share one year from the date of the merger. Assume a discount rate of 7%.

Note the PV (7%,1 year)= .9346

Prepare the journal entry to record the issuance of the shares. Show your calculation

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The initial issuance of shares can be recorded as follows Dr Inves... View the full answer