If I am increasing Current Liabilities to account for "accrued merger
expenses", where does the corresponding entry go to keep my balance
sheet "balanced"?

In other words, if I add "accrued merger expenses" of $20,000, does it
reduce my Retained Earnings by the same amount, or should I make a
separate adjustment?  I'm no accountant and just don't know where to
make the offsetting entry.  I think it comes out of Shareholders
Equity (through reducing Retained Earnings), but i'm not sure.

Todd

You charge it to the P&L Account.

Double check, but I belive qualified merger expenses can be
capitalized as part of the asset price. For example, you buy a company
for $20 million. All of that goes onto the Balance Sheet as various
asset categories, with any excess of purchase price over market value
going to Goodwill. Assuming you have 10% merger costs ($2 million),
you would just add that into the asset base of the entity you're
absorbing.

Here are sample JEs of what I think would happen:

1.     dr Assets $20MM
                       cr Cash $20MM
(the credit could also go to debt or equity depending on how you pay
for the acquisition... the debit to assets is broken into things like
PP&E, current assets and goodwill appropriately)

2.     dr Assets $2MM
                       cr Current Liabilities $2MM
(assuming the administative aquisition costs are spread across the
different tangible assets appropriately... if these are things like
consulting and legal fees, they're like trade debts that are often
billed quarterly)


3.    dr Current Liabilities $2MM
                      cr Cash $2MM
(happens when you actually pay the consultants' bills with cash)

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NOTE: Your question makes it seem like these are administrative-type
expenses directly tied to the execution of the merger. If the costs
are more like retiree buy-outs (or other 'extraordinary events'), they
go on the Income Statement in the appropriate place, which corresponds
to an Expense debit that reduces earnings (also reducing equity)