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ACT506 Module 1 Critical Thinking Assignment Option #1 Peerless Products (parent company) purchased on January 02,...

ACT506
Module 1 Critical Thinking Assignment
Option #1
Peerless Products (parent company) purchased on January 02, 20x7, Special Foods (subsidiary) for $300,000.
Information for acquisition entry for January 02, 20x7.
Peerless Products Fair Value Consideration: $300,000
Special Foods book value of equity:
Common stock $100,000
Paid in capital 50,000
Retained earnings 150,000
1). Required entry for investment equity using cash
1/2/20x7 Debit $xxxx
Credit $xxxx
2). Information to complete the parent company January to December 20x7 entries
Parent Subsidiary
   Common stock, January 02, 20x7 $600,000 $100,000
   Paid in capital 100,000 50,000
Retained earnings 300,000 150,000
Separate operating income - parent 200,000
Net income - subsidiary 100,000
Dividends 100,000 50,000
2A). Parent company entry for the year
   Debit $xxxx
Credit $xxxx
Record of parent 100% share of subsidiary 20x7 income
2B) Parent company entry of the year
Debit $xxx
Credit $XXX
Record parent 100% share of subsidiaries 20x7 dividend
3). Book value calculation for investment value on December 30, 20x7
Total investments equals Common stock Paid In capital Retained earnings
Original book value $xxx $xxx $xxx $xxx
Net income XXX XXX
Less dividends XXX XXX
Ending book value XXX XXX XXX XXX
Business   Accounting   
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