AC AC559-The financial statements for Peter Inc

(TCO B) The financial statements for Peter Inc. and Runner Corp., just prior to their combination, for the year ending December 31, 20X6, follow. Runner's buildings were undervalued on its financial records by $70,000.

Peter Inc.

Runner Corp.

Revenues

$1,350,000

$520,000

Expenses

(1,200,000)

(280,000)

Net income

$150,000

$240,000

Retained earnings, January 1, 20X6

650,000

510,000

Net income (above)

150,000

240,000

Dividends paid

(120,000)

(100,000)

Retained earnings, December 31, 20X6

$680,000

$650,000

Cash

$190,000

$130,000

Receivables and inventory

250,000

260,000

Buildings (net)

720,000

410,000

Equipment (net)

440,000

520,000

Total assets

$1,600,000

$1,320,000

Liabilities

$200,000

$170,000

Common stock

700,000

410,000

Additional paid-in capital

120,000

90,000

Retained earnings, December 31, 20X6 (above)

680,000

650,000

Total liabilities and stockholders' equity

$1,600,000

$1,320,000

On December 31, 20X6, Peter issued 50,000 new shares of its $7 par value stock in exchange for all the outstanding shares of Runner. Peter's shares had a fair value on that date of $40 per share. Peter paid $40,000 to an investment bank for assisting in the arrangements. Peter also paid $25,000 in stock issuance costs to effect the acquisition of Runner. Runner will retain its incorporation.

Required:

(1) Prepare the journal entry to record the issuance of common stock by Peter.

(2) Prepare the journal entry to record the payment of combination costs.

(3) Determine consolidated net income for the year ended December 31, 20X6.

(4) Determine consolidated additional paid-in capital at December 31, 20X6.