Condensed balance sheets for Phillips Company and Solina Company on January 1, 2010, are as follows:
| Phillips | Solina | |
| Current assets | 180,000 | 85,000 |
| Plant and equipment | 450,000 | 140,000 |
| Total assets | 630,000 | 225,000 |
| Total liabilities | 95,000 | 35,000 |
| Common stock, $10 par value | 350,000 | 160,000 |
| Other contributed capital | 125,000 | 53,000 |
| Retained earnings (deficit) | 60,000 | (23,000) |
| Total liabilities and equities | 630,000 | 225,000 |
On January 1, 2007, the stockholders of Phillips and Solina agreed to a consolidation.
Because FASB requires that one party be recognized as the acquirer and the other as the acquiree, it was agreed that Phillips was acquiring Solina. Phillips agreed to issue 20,000 shares of its $10 par stock to acquire all the net assets of Solina at a time when the fair value of Phillips’ common stock was $15 per share. On the date of consolidation, the fair values of Solina’s current assets and liabilities were equal to their book values. The fair value of plant and equipment was, however, $150,000. Phillips will incur $20,000 of direct acquisition costs and $6,000 in stock issue costs.
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