Assume that the parent company acquires its subsidiary by exchanging 84,000 shar
ID: 2330734 • Letter: A
Question
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 $38 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.
b. Given the following acquisition-date balance sheets of the parent and the subsidiary, prepare the consolidation entries.
c. Prepare the consolidation spreadsheet.
d. Where were the intangible assets on the parent or subsidiary’s balance sheets?
On the parent's balance sheet embedded in the equity investment account. On the subsidiary's balance sheet, each intangible asset is listed.
On the parent's balance sheet embedded in the equity investment account. After the consolidation process is complete, each intangible asset is listed on the consolidated balance sheet.
On the subsidiary's balance sheet embedded in retained earnings. After the consolidation process is complete, each intangible asset is listed on the consolidated balance sheet.
General Journal Description Debit Credit AnswerEquity investmentAPICCashRetained earningsGoodwill Answer Answer Common stock Answer Answer AnswerEquity investmentAPICCashRetained earningsGoodwill Answer AnswerExplanation / Answer
a Journal entry that the parent makes to record the acquisition Equity Investment $3,192,000 Common Stock $168,000 Additional Paid in Capital $3,024,000 Equity Investment = 84000 shares x $38 each Common stock = 84000 shares x $2 each APIC = 84000 shares x $36 each b Consolidation entries [E] Common Stock $182,000 APIC $227,500 Retained earnings $1,410,500 Equity Investment $1,820,000 [A] Trademark $240,000 Video Library $600,000 Patented Technology $125,000 Goodwill $407,000 Equity Investment $1,372,000 c Consolidation Worksheet Parent Subsidiary Debit Credit Consolidated Assets Cash $514,020 $265,160 $779,180 Accounts receivable $450,300 $633,360 $1,083,660 Inventory $650,000 $813,540 $1,463,540 Equity Investment $3,192,000 $1,820,000 $1,372,000 $1,372,000 -$1,372,000 PPE, net $10,600,000 $1,505,140 $12,105,140 Trademark $240,000 $240,000 Video Library $600,000 $600,000 Patented Technology $125,000 $125,000 Goodwill $407,000 $407,000 $15,406,320 $3,217,200 $16,803,520 Liabilities and Equity Accounts Payable $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 Common Stock $428,400 $182,000 $182,000 $428,400 APIC $3,276,000 $227,500 $227,500 $3,276,000 Retained Earnings $7,534,800 $1,410,500 $1,410,500 $7,534,800 $15,406,320 $3,217,200 $3,192,000 $3,192,000 $16,803,520 d on the parent's balance sheet embedded in the equity investment account. After the consolidation process is complete, each intangible asset is listed on the consolidated balance sheet
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.