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Phen Ltd. issued 500,000 common shares of $10 at par and paid $1,000,000 for the net assets of
Sung Ltd. on August 17, 2014. The market value of Phen Ltd.’s stocks was $20 per share at the time.
Sung Ltd. was dissolved immediately after the acquisition. The information related to Sung Ltd.’s
net assets is as follows (in thousands):
Book Value Fair Value
Cash $ 2,000 $ 2,000
Trade receivables 800 600
Inventories 3,200 3,000
Prepaid expenses 1,000 1,000
Land 6,000 6,800
Building-net 10,000 10,100
Equipment-net 3,500 3,000
Trade payable 1,300 1,500
Notes payable 4,300 4,600
Bonds payable 6,600 7,100
Common stock, $5 par 5,300
Retained Earnings 9,000
REQUIRED : Prepare the necessary journal entries for the acquisition.
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