Question

P1–27Acquisition in Multiple Steps LO 1–5 Peal Corporation issued 4,000 shares of its $10 par value stock with a market value of $85,000 to acquire 85 percent of the common stock of Seed Company on August 31, 20X3. Seed’s fair value was determined to be $100,000 on that date. Peal had earlier purchased 15 percent of Seed’s common stock for $9,000 on January 31, 20X1, and had carried this investment at fair value on its balance. Peal reported this investment at $15,000 on its balance sheet at August 31, 20X3, immediately prior to acquiring the remaining 85 percent of Seed’s shares. On August 31, 20X3, Peal also paid appraisal fees of $3,500 and stock issue costs of $2,000 incurred in completing the acquisition of the additional shares. Required Give the journal entries to be recorded by Peal in completing the acquisition of the additional shares of Seed.

Answer 1

	Journal entries to be recorded by Peal in completing the acquisition of the additional shares of Seed.
	Date	Account Titles	Debit	Credit
	August 31, 20X3	Investment in Seed Company stock	85,000
		Appraisal fees	3,500
		Common Stock (4,000 x 10 )		40,000
		Paid in Capital in excess of par-Common		43,000
		(85,000 - 40,000 - 2,000 )
		Cash		5,500
		(3,500 + 2,000 )