On January 1, 2012, Pruitt Company issued 30,000 shares of its $2 par value common stock for the net assets of Shah Company in a statutory merger accounted for as a purchase. Pruitt’s common stock had...

On January 1, 2012, Pruitt Company issued 30,000 shares of its $2 par value common stock for the net assets of Shah Company in a statutory merger accounted for as a purchase. Pruitt’s common stock had a fair value of $28 per share at that time. A schedule of the Shah Company assets acquired and liabilities assumed at book values (which are equal to their tax bases) and fair values follows:Additional Information:1. Pruitt’s income tax rate is 35%.2. Shah’s beginning inventory was all sold during 2012.3. Useful lives for depreciation and amortization purposes are:Plant assets……10 yearsPatents……8 yearsBond premium….10 years4. Pruitt uses the straight-line method for all depreciation and amortization purposes.Required:A. Prepare the entry on Pruitt Company’s books to record the acquisition of the assets and assumption of the liabilities of Shah Company.B. Assuming Pruitt Company had taxable income of $468,000 in 2012, prepare the income tax entry for2012.

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On January 1 2012 Pruitt Company issued 30 000 shares of