Prepare the journal entries that would be booked in Parent Inc. from the acquisition the consolidation entries needed Prepare the consolidated balance sheet on January 31, 2021 immediately following the acquisition using theworksheet approach.
On January 31, 2021, Parent Inc. purchased 90% of Sub Inc., issuing common shares of Parent with a market value of $400,000. Costs were $10,000 to issue the shares and $16,000 of other legal costs.
Parent and Sub Inc had the following balance sheets on January 30, 2021 immediately prior to the acquisition:
|
|
Parent Inc. |
Sub Inc. |
Sub Inc. |
|
|
(carrying value) |
(carrying value) |
(fair value) |
|
Cash |
$1,200,000 |
$300,000 |
$300,000 |
|
|
$ 400,000 |
$ 64,000 |
$ 64,000 |
|
Inventory |
$ 240,000 |
$ 80,000 |
$ 60,000 |
|
Plant and Equipment (net) |
$ 960,000 |
$350,000 |
$300,000 |
|
Accumulated depreciation |
($100,000) |
($94,000) |
|
|
Trademark |
|
$ 20,000 |
$ 36,000 |
|
Total Assets |
$2,700,000 |
$720,000 |
$760,000 |
|
Accounts Payable |
$1,500,000 |
$300,000 |
$300,000 |
|
Bonds Payable |
$ 600,000 |
$240,000 |
$210,000 |
|
|
|
|
$510,000 |
|
Common Shares |
$ 500,000 |
$ 60,000 |
|
|
|
$ 100,000 |
$120,000 |
|
|
Total Liabilities and Equity |
$2,700,000 |
$720,000 |
|
- Prepare the journal entries
- that would be booked in Parent Inc. from the acquisition
- the consolidation entries needed
- Prepare the consolidated
balance sheet on January 31, 2021 immediately following the acquisition using theworksheet approach.
- Start with Parent & Sub entity statements.
--Include in your Parent stmt the entries from (b)(i).
- Include Debits, Credits columns showing the adjustments from (b)(ii), including reference#s to each
journal entry
|
Parent Inc. |
Sub Inc. |
Ref# |
Debit |
Ref# |
Credit |
Consolidated B/Sheet |
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