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Big Corporation purchases the net assets of Small Corporation for P500,000 cash Prior to the combination,...

Big Corporation purchases the net assets of Small Corporation for P500,000 cash Prior to the combination, Small Corporation has the following Statement of Financial PROBLEMS Problem 13-1 Position Small Corporation Statement of Financial Position January 1, 2017 Liabilities and Equity P50.000 Current as Accounts roove P120.000 100.000 230,000 200.000 Stockholders' equity: Common stock PIO par Retained camino P200,000 250,000 Property, plant and equipment Total Libilities and Equity P300.000 Tocal Act 7.500.000 Fair market values agree with book values except forinventories and property, plant and equipment, which have fair market values of P140,000 and P300,000 respectively To consummate the transaction, Big Corporation incurs P5,000 acquisition-related costs. Required: 1. Record the acquisition on Big Corporation's books. Provide support for your entry as needed 2. Record the sale on the books of Small Corporation and the subsequent total liquidation of the corporation

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Answer #1

ANSWER 1 : ENTRIES IN BOOKS OF BIG CORPORATION:

PARTICULARS DEBIT CREDIT
ACQUITION EXPENSES 5000
TO CASH 5000
(ACQUITION RELATED COST)
ACCOUNT RECEIVABLES 120000
INVENTORY 140000
PROPERTY PLANT EQUIPMENT 300000
TO CURRENT LIABILITY 50000
TO CASH 500000
TO BARGAIN PURCHASE ELEMENT 10000
(BEING NET ASSESTS ACQUIRED)

ANSWER 2 : ENTRIES IN BOOKS OF SMALL CORPORATIONS:

PARTICULARS DEBIT CREDIT
INVESTMENT IN BIG COR. 450000
CURRENT LIABILITIES 50000
TO ACCOUNT RECEIVABLES 120000
TO INVENTORY 140000
TO PLANT PROPERTY EQUIPMENT 280000

(BEING ASSESTS AND LIABILITIES TAKEN OVER)
COMMON STOCK 200000
RETAINED EARNING 250000

TO INVESTMENT IN BIG CORPORATION

 450000
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