Solutions Manual for Advanced Accounting, 13th edition by Floyd A. Beams, Joseph H. Anthony |Chapter 1-23

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, Chapter 1 1-3
Solution E1-4

Journal entries on Pam’s books to record the acquisition

Investment in Sun 10,200,000
Common stock, $10 par 4,800,000
Additional paid-in capital 5,400,000
To record issuance of 480,000 shares of $10 par common stock with a fair
value of $10,200,000 for the common stock of Sun in a business
combination.

Additional paid-in capital 60,000
Investment expenses 180,000
Other assets (or Cash) 240,000
To record costs of registering and issuing securities as a reduction of paid-
in capital, and record direct and indirect costs of combination as
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expenses.

Current assets 4,400,000
Plant assets 8,800,000
Liabilities 1,200,000
Investment in Sun 10,200,000
Gain from bargain purchase 1,800,000
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To record allocation of the $10,200,000 cost of Sun Company to identifiable
assets and liabilities according to their fair values, and the gain
from the bargain purchase,computed as follows:
Cost $10,200,000
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Fair value of net assets acquired 12,000,000
Bargain purchase amount $ 1,800,000
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