1. **Problem Statement:** The Issuing Corporation issues 3,000 shares of its common stock to acquire all 4,000 shares of the Combinee Company. The combination qualifies as a pooling of interests, and the Combinee ceases to exist as a separate entity. We need to record the combination in the books of the Issuing Corporation. 2. **Pooling of Interests Method:** Under pooling of interests, the assets, liabilities, and equity of both companies are combined at their book values without recognizing goodwill or revaluing assets. 3. **Step 1: Combine Assets and Liabilities** - Issuing Company Total Assets = 100,000 - Combinee Company Total Assets = 36,000 - Combined Total Assets = $100,000 + 36,000 = 136,000$ - Issuing Company Total Liabilities = 17,000 + 10,000 = 27,000 - Combinee Company Total Liabilities = 3,000 + 11,000 = 14,000 - Combined Total Liabilities = $27,000 + 14,000 = 41,000$ 4. **Step 2: Combine Equity Accounts** - Issuing Company Equity = Common Stock (40,000) + Additional Paid-in Capital (10,000) + Retained Earnings (23,000) = $73,000$ - Combinee Company Equity = Common Stock (4,000) + Additional Paid-in Capital (3,000) + Retained Earnings (15,000) = $22,000$ - Combined Equity = $73,000 + 22,000 = 95,000$ 5. **Step 3: Record Issuance of Shares** - Issuing Corporation issues 3,000 shares to acquire Combinee's 4,000 shares. - Par value of Issuing Company stock is Birr 2 per share. - Common Stock increase = $3,000 \times 2 = 6,000$ - Additional Paid-in Capital increase = (Issue price per share - par value) \times number of shares issued. 6. **Step 4: Calculate Issue Price per Share** - Since pooling uses book values, the value of shares issued equals Combinee's equity = 22,000. - Issue price per share = $\frac{22,000}{3,000} = 7.33$ per share - Additional Paid-in Capital increase = $(7.33 - 2) \times 3,000 = 5.33 \times 3,000 = 15,990$ 7. **Step 5: Journal Entry in Issuing Corporation Books** - Debit Combinee's assets and liabilities at book value: - Cash 5,000 - Other current assets 12,000 - Noncurrent assets 19,000 - Total assets 36,000 - Less liabilities: - Current liabilities 3,000 - Long-term liabilities 11,000 - Credit Common Stock (3,000 shares at Birr 2 par) 6,000 - Credit Additional Paid-in Capital 15,990 8. **Summary Journal Entry:** \begin{align*} \text{Dr. Cash} &\quad 5,000 \\ \text{Dr. Other Current Assets} &\quad 12,000 \\ \text{Dr. Noncurrent Assets} &\quad 19,000 \\ \text{Cr. Current Liabilities} &\quad 3,000 \\ \text{Cr. Long-term Liabilities} &\quad 11,000 \\ \text{Cr. Common Stock} &\quad 6,000 \\ \text{Cr. Additional Paid-in Capital} &\quad 15,990 \end{align*} This entry records the acquisition by pooling of interests, combining assets and liabilities at book value and issuing stock accordingly. **Final answer:** The combination is recorded by debiting the acquired assets, crediting the assumed liabilities, and crediting common stock and additional paid-in capital for the shares issued at book value.