QUESTION 3 Not complete Marked out of 5900 P Flag question C

QUESTION 3 Not complete Marked out of 59.00 P Flag question Consolidation at date of acquisition (purchase price greater than book value, acquisition journal entries Assume that the parent company acquires its subsidiary by exchanging 84,000 shares of its $2 par value Common Stock, with a fair value on the acquisition date of $39 per share, for all of the outstanding voting shares of the investee. In its analysis of the investee company, the parent values all of the subsidiary\'s assets and liabilities at an amount equaling their book values except for an unrecorded Trademark with a fair value of $240,000, an unrecorded Video Library valued at $600,000, and Patented Technology with a fair value of $125,000. a. Prepare the journal entry that the parent makes to record the acquisition. General Journal Description Debit Credit Common stock b. Given the following acquisition-date balance sheets of the parent and the subsidiary, prepare the consolidation entries. Balance Sheet Parent Subsidiary Assets Cash Accounts receivable Inventory Equity investment Property, plant & equipment 450,300 650,000 3,276,000 $514,020 $265,160 633,360 813,540 10,600,000 1655,140 $15,490,320 3,367,200 Liabilities and stockholders\' equity Accounts payable Accrued liabilities Long-term liabilities Common stock APIC Retained earnings $150,480 $177,800 309,400 910,000 428,400 232,000 277,500 7,534,800 1,460,500 $15,490,320 3,367,200 176,640 3,840,000 3,360,000

Solution

Investment in Subsidary company $3,276,000    =84000*$39           To Common stock at Par Value $168,000     =84000*$2           To common stock additional value $3,108,000     = 84000*$37 Balance sheet Parent Subsidary Eliminated entries Consolidated Asset Cash $514,200 $265,160 $779,360 Accounts receivable $450,300 633,360 $1,083,660 Inventory $650,000 813540 $1,463,540 Equity investment 3,276,000                          E 168,000                          A 3,108,000 Property plant and Eqipment $10,600,000 $1,655,140 $12,255,140 Trademark $240,000 $240,000 video Library $600,000 $600,000 Patented technology $125,000 $125,000 $15,490,500 $3,367,200 $965,000 $16,546,700 Accounts payble $150,480 $177,800 $328,280 Accrued Liabilities $176,640 $309,400 $486,040 Long term liabilities $3,840,000 $910,000 $4,750,000 Commonstock $428,400 $232,000 $64,000 $428,400 APIC $3,360,000 $277,500 $529,500 $3,082,500 Retained Earning $7,534,800 $1,460,500 $1,460,500 $7,534,800 $15,490,320 $3,367,200 $2,054,000 $16,803,520 Common stock $232,000 APIC subsidary $3,108,000 R/E Beginning subsidary $64,000 Investment in subsidary 3,276,000 TradeMark $240,000 Video Libarary $600,000 Patented Technology $125,000 R/E Beginning subsidary $432,200 Investment in subsidary $1,397,200