Question

1. Lester Company transferred the following assets to a newly created subsidiary, Mumby Corporation, in exchange for 40,000 shares of its $3 par value stock:  

	Cost	Book Value
Cash	$ 40,000	$ 40,000
Accounts Receivable	75,000	68,000
Inventory	50,000	50,000
Land	35,000	35,000
Building	160,000	125,000
Equipment	240,000	180,000

1. Give the journal entry in which Lester recorded the transfer of assets to Mumby Corporation. (solution in Microsoft word)

                                                                    

2. Give the journal entry in which Mumby recorded the receipt of assets and issuance of common stock to Lester. ( solution in Microsoft word )

Answer 1

Answer a.

Journal Entry(In books of Lester)

Common stockholder's A/c Dr 448000
To Land 35000
To Building 125000
To Equipment 180000
To Cash 40000
To Accounts Receivable   68000

Common shares of Mumby Corporation A/c Dr 120000
Cash A/c Dr 328000
To Common Stockholder's A/c 448000

b. In the books of Mumby Corporation

Land Dr 35000
Building Dr 160000
Equipment Dr 240000
Inventory Dr 50000
Cash Dr 75000
Accounts Receivable Dr 40000
To Common shares A/c 120000
To Cash A/c 328000
To Goodwill A/c 152000