The condensed balance sheet of

The condensed balance sheet of Bahrain Company on December 31,2019, is shown below:

Bahrain Company

Balance Sheet (Prior to business combination) As atDecember 31st, 2019



$ 20,000

Other current assets


Plant assets (net)


Total assets


Liabilities and stockholders’ Equity

Current liabilities

$ 80,000

Long- term debt


Common stock, $2 par


Additional paid in capital


Retained earning


Total liabilities and stockholder’sequity


On December 31, 2019, Manama Corporation issued 70,000 commonstock of its $6 par value per share (current fair value $10 pershare) to acquire all the net assets of Bahrain Company (exceptcash) in a business combination. The carrying amounts of Bahrainare other current assets and current liabilities were the same astheir current fair value. However, current fair values of Bahrain’splant assets and long-term debt were $920,000 and $190,000,respectively. Also, on December 31, Manama paid $50,000out-of-pocket costs in connection with the business combination, ofwhich $20,000 were finder’s, accounting, and legal fees directlyrelated to the combination, and $30,000 were costs of registeringand issuing the common stock to affect the combination.


Prepare journal entries for Manama Corporation to recordits merger with Bahrain Company on December 31st, 2019.(Disregard income taxes)






Dec.31, 2019

Plant Asset


Other Current Assets


Common Stock (70,000 Shares * $6Par)


Additional Paid in Capital (70,000Shares * (10-6)


Long Term Debt


Current Liabilities


Capital Reserve


(To record merger with BahrainCompany)

Calculation of Net Asset Value

Fair Value of PlantAssets


Plus: Other CurrentAssets


Less: Long Term Debt


Less: CurrentLiabilities


Net AssetValue


Less: Consideration Paid (70,000Shares * $10)




Note – Out of pocketcost and other expenses incurred related to combination is notcapitalized and record separately.

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