FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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On July 1, 20X1, Pushway Corporation issued 100,000 shares of common stock in exchange for all of Stroker Company’s common stock. The Pushway stock issued had a market value of $500,000 on the date of the exchange. Following are the July 1, 20X1, pre-acquisition balance sheets of Pushway and Stroker, plus fair value information for Stroker’s assets and liabilities.

 

  Stroker
  Pushway Book Value Fair Value
Assets                  
Current assets $ 300,000   $ 100,000   $ 100,000  
Long-term assets   600,000     400,000     470,000  
Total assets $ 900,000   $ 500,000   $ 570,000  
Liabilities                  
Current liabilities $ 200,000   $ 50,000   $ 50,000  
Long-term liabilities   250,000     100,000     120,000  
Total liabilities   450,000     150,000   $ 170,000  
Stockholders' equity                  
Common stock   300,000     250,000        
Retained earnings   150,000     100,000        
Total stockholders' equity   450,000     350,000        
Total liabilities and equity $ 900,000   $ 500,000        
   

 

Required:

  1. Provide the journal entry Pushway recorded for the acquisition of Stroker, assuming Pushway used the acquisition method.
  2. What amount will be shown on the July 1, 20X1, consolidated balance sheet for the following:
  1. Total assets
  2. Total liabilities
  3. Total equity
  1. Now assume this transaction had been completed prior to the elimination of poolings of interest, and that the pooling method had been used to record the acquisition. Redo requirements 1 and 2.
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What amount will be shown on the July 1, 20X1, consolidated balance sheet for the following:

  1. Total equity

Now assume this transaction had been completed prior to the elimination of poolings of interest, and that the pooling method had been used to record the acquisition. Redo requirements 1 and 2:

  1. Total assets
  2. Total liabilities
  3. Total equity

 

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Follow-up Questions
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Follow-up Question

What amount will be shown on the July 1, 20X1, consolidated balance sheet for the following:

  1. Total equity

Now assume this transaction had been completed prior to the elimination of poolings of interest, and that the pooling method had been used to record the acquisition. Redo requirements 1 and 2:

  1. Total assets
  2. Total liabilities
  3. Total equity

 

Solution
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by Bartleby Expert
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