Explore BrainMass

Advanced Accounting Business Combination

Comprehensive Business Combination Problem
Integrated Industries Inc. entered into a business combination agreement with Hydrolized Chemical Corporation (HCC) to ensure an uninterrupted supply of key raw materials and to realize certain economies from combining the operating process and the marketing efforts of the two companies. Under the terms of the agreement, Integrated issued 180,000 shares of its $1 par common stock in exchange for all of HCC's assets and liabilities. The Integrated shares then were distributed to HCC's shareholders, and HCC was liquidated.

Immediately prior to the combination, HCC balance sheet appeared as follows, with fair values also indicated: (HCC balance sheet attached)

Immediately prior to the combination, Integrated's common stock was selling for $14 per share. Integrated incurred direct costs of $135,000 in arranging the business combination and $42,000 of co9sts associated with registering and issuing the common stock used in the combination.

a) Prepare all journal entries that Integrated should have entered on its books to record the business combination.
b) Present all journal entries that should have been entered on HCC's books to record the combination and the distribution of the stock received.

Solution Preview

(a) Dr. Investment in HCC 2,520,000 (180,000 shares at $14 per share)
Cr. Cash 2,520,000

Cr. Investment in HCC ...

Solution Summary

This Solution provides the journal entries necessary to complete the given actions.