Problem 1-35 (Static) Purchase at More than Book Value LO 1-5

Pamrod Manufacturing acquired all the assets and liabilities of Stafford Industries on January 1, 20X2, in exchange for 4,000 shares of Pamrods $20 par value common stock. Balance sheet data for both companies just before the merger are given as follows:

	Pamrod Manufacturing								Stafford Industries
Balance Sheet Items	Book Value				Fair Value				Book Value				Fair Value
Assets
Cash	$	70,000			$	70,000			$	30,000			$	30,000
Accounts Receivable		100,000				100,000				60,000				60,000
Inventory		200,000				375,000				100,000				160,000
Land		50,000				80,000				40,000				30,000
Buildings and Equipment		600,000				540,000				400,000				350,000
Less: Accumulated Depreciation		(250,000	)							(150,000	)
Total Assets	$	770,000			$	1,165,000			$	480,000			$	630,000
Liabilities and Equities
Accounts Payable	$	50,000			$	50,000			$	10,000			$	10,000
Bonds Payable		300,000				310,000				150,000				145,000
Common Stock:
$20 par value		200,000
$5 par value										100,000
Additional Paid-In Capital		40,000								20,000
Retained Earnings		180,000								200,000
Total Liabilities and Equities	$	770,000							$	480,000

Pamrod shares were selling for $150 on the date of acquisition.

Required:

1. Prepare a Journal entry to record the acquisition in Pamrod's books.

2. Prepare a balance sheet for the combined enterprise immediately following the business combination.

Prepare a Journal entry to record the acquisition in Pamrod's books. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Prepare a balance sheet for the combined enterprise immediately following the business combination Note: Amounts to be deducted should be indicated by minus sign