Question

Consolidation entries at date of acquisition (purchase price greater than book value) A parent company exchanges...

Consolidation entries at date of acquisition (purchase price greater than book value)
A parent company exchanges 12,000 shares of its $2 par value common stock, with a fair value of $9/share, for all of the shares owned by the subsidiary’s shareholders. On the acquisition date, the subsidiary reported $30,000 of contributed capital (i.e., common stock) and $45,000 of Retained Earnings. An examination of the subsidiary’s balance sheet revealed that book values were equal to fair values for all assets except for PPE (net), which has a book value of $40,000 and a fair value of $73,000.

a. Prepare the entry that the parent makes to record the investment.

General Journal
Description Debit Credit
AnswerEquity investmentPPE (net)Common stockAdditional paid-in capitalRetained earnings Answer Answer
Common stock Answer Answer
AnswerEquity investmentPPE (net)Common stockAdditional paid-in capitalRetained earnings Answer Answer
to record the acquisition

b. Prepare the [E] and [A] consolidation entries.

Consolidation Worksheet
Description Debit Credit
[E] Common stock Answer Answer
AnswerEquity investmentPPE (net)Common stockAdditional paid-in capitalRetained earnings Answer Answer
AnswerEquity investmentPPE (net)Common stockAdditional paid-in capitalRetained earnings Answer Answer

[A] AnswerEquity investmentPPE (net)Common stockAdditional paid-in capitalRetained earnings Answer Answer
AnswerEquity investmentPPE (net)Common stockAdditional paid-in capitalRetained earnings Answer Answer
Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

1. Entry for investment:-

Business Purchase A/c dr 108000 (12000*9) To Subsidiary Co. A/c 108000 (Being business purchases)

Subsidiary Co. A/c dr 108000 To Equity Share Capital A/c 24000 (12000*2) To Secuity Premium A/c 84000 (12000*7) (being Payment made to Subisidiary co. Share holders)

*All Asset A/c dr Goodwill A/c dr To Business Purchase To All Laibilities (being Business Merged)

*Note:-1. In the Que. the book value of asset is no given therefor the amt. calculation can't be done for this enrty. 2. Goodwill is consider because Qus. say that Purchase Price of business is greater than book value of business. 3. There is no remain common stock because holding co. buy all the share of subsidiary co. 4. At the time of consolidation of financial statement fair value assest of subsidiary co. shall taken.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Consolidation at the end of the first year subsequent to date of acquisition—Cost method (purchase price...
Consolidation at the end of the first year subsequent to date of acquisition—Cost method (purchase price equals book value) Assume that the parent company acquires its subsidiary on January 1, 2016, by exchanging 31,500 shares of its $1 par value Common Stock, with a market value on the acquisition date of $40 per share, for all of the outstanding voting shares of the acquiree. You have been charged with preparing the consolidation of these two companies at the end of...
A parent company acquires all of the outstanding common stock of its subsidiary for cash purchase...
A parent company acquires all of the outstanding common stock of its subsidiary for cash purchase price of $325,000. On the acquisition date, the subsidiary reported a book value of Stockholders’ Equity of $120,000, comprised of $50,000 of Common Stock and $70,000 of Retained Earnings. An examination of the subsidiary’s balance sheet revealed that book values were equal to fair value for all assets, expect for an unrecorded patent, which the parent valued at $160,000 during the acquisition. a.     What did...
Consolidating Eliminating Entries, Date of Acquisition: U.S. GAAP and IFRS Plummer Corporation acquired 90 percent of...
Consolidating Eliminating Entries, Date of Acquisition: U.S. GAAP and IFRS Plummer Corporation acquired 90 percent of Softek Technologies' voting stock by issuing 2,000,000 shares of $2 par common stock with a fair value of $25,000,000. In addition, Plummer paid $500,000 in cash to the consultants and accountants who advised in the acquisition. Softek's stockholders' equity at the date of acquisition is as follows: Common stock $200,000 Additional paid-in capital 8,000,000 Retained earnings 5,000,000 Accumulated other comprehensive income (800,000) Treasury stock...
Consolidation several years subsequent to date of acquisition—Equity method Assume that a parent company acquired a...
Consolidation several years subsequent to date of acquisition—Equity method Assume that a parent company acquired a subsidiary on January 1, 2014. The purchase price was $665,000 in excess of the subsidiary’s book value of Stockholders’ Equity on the acquisition date, and that excess was assigned to the following [A] assets: [A] Asset Original Amount Original Useful Life Property, plant and equipment (PPE), net $140,000 16 years Patent 245,000 7 years License 105,000 10 years Goodwill 175,000 Indefinite $665,000 The [A]...
On January 1, 2015, NewTune Company exchanges 17,496 shares of its common stock for all of...
On January 1, 2015, NewTune Company exchanges 17,496 shares of its common stock for all of the outstanding shares of On-the-Go, Inc. Each of NewTune’s shares has a $4 par value and a $50 fair value. The fair value of the stock exchanged in the acquisition was considered equal to On-the-Go’s fair value. NewTune also paid $31,250 in stock registration and issuance costs in connection with the merger.      Several of On-the-Go’s accounts fair values differ from their book values on...
On January 1, NewTune Company exchanges 17,808 shares of its common stock for all of the...
On January 1, NewTune Company exchanges 17,808 shares of its common stock for all of the outstanding shares of On-the-Go, Inc. Each of NewTune’s shares has a $4 par value and a $50 fair value. The fair value of the stock exchanged in the acquisition was considered equal to On-the-Go’s fair value. NewTune also paid $36,900 in stock registration and issuance costs in connection with the merger. Several of On-the-Go’s accounts’ fair values differ from their book values on this...
On January 1, NewTune Company exchanges 15,000 shares of its common stock for all of the...
On January 1, NewTune Company exchanges 15,000 shares of its common stock for all of the outstanding shares of On-the-Go, Inc. Each of NewTune’s shares has a $4 par value and a $50 fair value. The fair value of the stock exchanged in the acquisition was considered equal to On-the-Go’s fair value. NewTune also paid $25,000 in stock registration and issuance costs in connection with the merger. Several of On-the-Go’s accounts’ fair values differ from their book values on this...
On January 1, 2015, NewTune Company exchanges 15,000 shares of its common stock for all of...
On January 1, 2015, NewTune Company exchanges 15,000 shares of its common stock for all of the outstanding shares of On-the-Go, Inc. Each of NewTune’s shares has a $4 par value and a $50 fair value. The fair value of the stock exchanged in the acquisition was considered equal to On-the-Go’s fair value. NewTune also paid $25,000 in stock registration and issuance costs in connection with the merger. Several of On-the-Go’s accounts’ fair values differ from their book values on...
Consolidation subsequent to date of acquisition—Equity method with noncontrolling interest , AAP and gain on upstream...
Consolidation subsequent to date of acquisition—Equity method with noncontrolling interest , AAP and gain on upstream intercompany equipment sale A parent company acquired its 75% interest in its subsidiary on January 1, 2011. On the acquisition date, the total fair value of the controlling interest and the noncontrolling interest was $350,000 in excess of the book value of the subsidiary’s Stockholders’ Equity. All of that excess was allocated to a Royalty Agreement, which had a zero book value in the...
Through the payment of $11,525,000 in cash, Drexel Company acquires voting control over Young Company. This...
Through the payment of $11,525,000 in cash, Drexel Company acquires voting control over Young Company. This price is paid for 60 percent of the subsidiary's 100,000 outstanding common shares ($40 par value) as well as all 17,500 shares of 6 percent, cumulative, $120 par value preferred stock. Of the total payment, $3.5 million is attributed to the fully participating preferred stock with the remainder paid for the common. This acquisition is carried out on January 1, 2018, when Young reports...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT