Exercise 3-9 Peep Inc. acquired 100% of the outstanding common stock of Shy Inc.

Question

Exercise 3-9 Peep Inc. acquired 100% of the outstanding common stock of Shy Inc. for $2,359,500 cash and 15,520 shares of its common stock ($2 par value). The stock's market value was $41 on the acgustbon date. Inneencured the feloing direct costs Accounting fees for the purchase Legal fees for registering the common stock other legal fees for the acquisition Travel expenses to meet with Shy managers SEC filing fees 15,750 32,940 46,040 4,770 1,950 $101,450 Before the acquisition consummation date, $94,870 of the direct costs was charged to a deferred charges account pending the completion of the acquisition. The remaining $6,580 has not been accrued or paid.

Explanation / Answer

SOLUTION

S.No. Account titles and Explanations Debit ($) Credit ($) 1. Investment in Shy Inc. [$2,359,500 + (15,520 * $41)] 2,995,820 Cash 2,359,500 Common Stock (15,520 *$2) 31,040 Other Contributed Capital [15,520 * ($41 - $2)] 605,280 (To record the acquisition) 2. Acquisition Expense 101,450 Deferred Acquisition Charges 94,870 Acquisition Costs Payable 6,580 (To record the direct costs)

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