Merrill acquires 100 percent of the outstanding voting shares of Harriss Company on January 1, 2008. To obtain these shares, Merrill pays $200,000 in cash and issues 10,000 shares of its own $10 par value common stock. On this date, Merrill’s stock has a fair value of $18 per share. Merrill also pays $10,000 to a local investment company for arranging the acquisition. Merrill paid an additional $6,000 in stock issuance costs. The book values for both Merrill and Harriss as of January 1, 2008, follow. The fair value of each of Harriss’s accounts is also included. In addition, Harriss holds a fully amortized patent that still retains a $30,000 value.

Harriss Company
Merrill, Inc. Book Values	Book Values	Fair Values
Cash	$300,000	$ 40,000	$ 40,000
Receivables	160,000	90,000	80,000
Inventory	220,000	130,000	130,000
Land	100,000	60,000	60,000
Buildings (net)	400,000	110,000	140,000
Equipment (net)	120,000	50,000	50,000
Accounts payable	(160,000)	(30,000)	(30,000)
Long-term liabilities	(380,000)	(170,000)	(150,000)
Common stock	(400,000)	(40,000)
Retained earnings	(360,000)	(240,000)

a. Assume that this combination is a statutory merger so that Harriss’s accounts are to be transferred to Merrill’s records with Harriss subsequently being dissolved as a legal corporation. Prepare the journal entries for Merrill to record this merger.

b. Assume that no dissolution is to take place in connection with this combination. Rather, both companies retain their separate legal identities. Prepare a worksheet to consolidate the two companies as of January 1, 2008