GEO COMPANY

Balance sheet (prior to business combination)

March 31, 2005

Assets Fair Value

Cash $20,000 $-
Other current assets $140,000 $140,000
Plant assets (net) $740,000 $920,000
Total Assets $900,000 $1,060,000

Liabilities and Stockholder's Equity

Current Liabilities $80,000 $80,000
Long-Term debt $200,000 $190,000
$280,000 $270,000
Common Stock, $2 par $180,000
Add'l paid-in Capital $120,000
Retained earnings $320,000
Total Liabilities & Stock holder's Equity $900,000
$800,000 Cost ($700,000+$10,000+$70,000+$20,000)
$(790,000) Fair Value ($1,060,000 - $270,000)
$10,000 Goodwill

GEO COMPANY
Journal Entries
March 31, 2005

Investment in GEO Company $700,000

Cash $700,000

Investment in GEO Company

($10,000 + $70,000 + $20,000) $100,000
Cash $100,000

Total Cost of GEO Company

($700,000 + $100,000) $800,000

Less: Carrying Amnt of GEO

Company identifiable net
assets ($900,000 - $280,000) $620,000

Current Assets $-
Plant Assets $180,000
Long-term Debt $10,000 $810,000
Goodwill $(10,000)

Current Assets $-
Plant Assets $920,000
Other Assets $140,000
Discount on Long-Term Debt $10,000
Goodwill $10,000
Current Liabilities $80,000
Long-Term Debt $200,000
Investm ent in GEO Company
($700,000 + $100,000) $800,000
$1,080,000 $1,080,000
0,000+$70,000+$20,000)
270,000)
On March 31, 2005, Combinor Company issued 100,000 shares of its $1 par common stock
(current fair value $5 a share) for the net assets of Combinee Company. Also on that date,
Combinor paid the following out-of-pocket costs in connection with the combination:

Finder's, accounting, and legal fees relating to business combo (direct)

Costs associated with SEC registration statement (indirect)

COMBINEE COMPANY
Balance Sheet (prior to Business combination)
March 31, 2005
Carrying Current Fair
Amnts Values
Assets
Current Assets $200,000 $260,000
Plant Assets (net) $400,000 $480,000
Other Assets (none intangible) $140,000 $150,000
Total Assets $740,000 $890,000

Liabilities and Stockholders' Equity

Current Liabilities $80,000 $80,000

Long-Term Debt $260,000 $260,000
$340,000 $340,000
Common Stock, no par or stated Value $150,000
Retained Earnings $250,000
Total liabilities and stockholders' equity $740,000

COMBINOR COMPANY
Journal Entries
March 31, 2005

Debit
Investment in Combinee Company common stock
(100,000 x $5) $500,000
Common Stock (100,000 x $1)
Paid-in Capital in Excess of Par

Investment in Combinee Company Common Stock $70,000

Paid-in Capital in Excess Par $50,000
Cash

Current Assets (FMV) $260,000

Plant Assets (FMV) $480,000
Other Assets (FMV) $150,000
Goodwill $20,000
Current Liabilities
Long Term Debt
Investment in Combinee Company Common Stock
($500,000 + $70,000)

Total cost of Combinee Company

($500,000 + $120,000) $570,000

Less: Carrying amnt of Combinee's

Identifiable net assets ($740,000 - $340,000) $400,000

Excess of (Dificiency) of current fair values

of identifiable net assets over carrying amnts:
Current Assets $60,000
Plant Assets $80,000
Long-Term debt $10,000 $550,000
Amount of Goodwill $20,000
 $70,000.00
$50,000.00
$120,000.00

Difference

$(60,000)
$(80,000)
$(10,000)
$(150,000)

Credit

$100,000
$400,000

$120,000

$80,000
$260,000

$570,000
On January 31, 2005, La Salle Corporation acquired for $540,000 cash all the net assets
except cash of De Soto Company and paid $60,000 cash to a law firm for legal services in
connection with the business combination. The balance sheet of De Soto Company on Jan-
uary 31, 2005, prior to the business combination, was as follows:

DE SOTO COMPANY
Balance Sheet (prior to Business combination)
January 31, 2005
Carrying Current Fair
Amnts Values Difference
Assets
Cash $40,000
Other current assets (net) $280,000 $300,000 $(20,000)
Plant assets (net) $760,000 $874,000 $(114,000)
Intangible asset (net) $120,000 $76,000 $44,000
Total assets $1,200,000 $1,250,000 $(90,000)

Liabilities and Stockholders' Equity

Liabilities $620,000 $620,000

Common stock, no par or state value $250,000
Retained Earnings $330,000
Total liabilities & Stockholders' Equity $1,200,000

Current Fair Value ($1,250,000 - 620,000 = $630,000)

total Cost of $600,000 ($540,000 + $60,000 = $600,000)
Excess of CFV $30,000 ($630,000 - $600,000 = $30,000)

to plant assets: $30,000 x $874,000 $27,600

$874,000 + 76,000

to intangible assets: $30,000 x $76,000 $2,400

$874,000 + 76,000 $30,000

La Salle Corporation
Journal Entries
March 31, 2005

Debit Credit

Investment in Net Assets of De Soto Company $540,000

Cash $540,000

Investment in Net Assets of De Soto Company $60,000

Cash $60,000

Current Assets $300,000

Plant Assets ($874,000 - $27,600) $846,400
Intangible Assets ($76,000 - $2,400) $73,600
Current Liabilities $620,000
Long Term Debt $-
Investment in Net Assets of De Soto Company ($540,000 + $60,000) $600,000