Consolidated Balance Sheet, Stock Purchase On January 2, 2014, Prunce Company ac
ID: 2409871 • Letter: C
Question
Consolidated Balance Sheet, Stock Purchase On January 2, 2014, Prunce Company acquired 90% of the outstanding common stock of Sun Company for $192,000 cash. Just before the acquisition, the balance sheets of the two companies were as follows: Prunce Sun Cash $260,000 $ 64,000 Accounts receivable (net) 142,000 23,000 Inventory 117,000 54,000 Plant and equipment (net) 386,000 98,000 Land 63,000 32,000 Total asset $968,000 $271,000 Accounts payable $104,000 $ 47,000 Mortgage payable 72,000 39,000 Common stock, $2 par value 400,000 70,000 Other contributed capital 208,000 20,000 Retained earnings 184,000 95,000 Total equities $968,000 $271,000 LO8LO 7 LO8LO 7 LO8 Copyright © 2015 John Wiley & Sons, Inc. 106 Chapter 3 Consolidated Financial Statements—Date of Acquisition The fair values of Sun Company’s assets and liabilities are equal to their book values with the exception of land. Required: A. Prepare a journal entry to record the purchase of Sun Company’s common stock. B. Prepare a consolidated balance sheet at the date of acquisition.
Explanation / Answer
1)
Debit Credit
Investment in Sun Company 192,000
Cash 192,000
2) Consolidated Balance sheet
Assets Amount Working
Cash 132,000 (260,000+64,000-192,000)
Accounts Receivable 165,000 (142,000+23,000)
Inventory 171,000 (117,000+54,000)
Plant and Equipment (net) 484,000
Land 123,333 192,000/.9-(70,000+20,000+95,000)=28,333.33
(63,000+32,000+28,333*)
Total Assets 1,075,333
Liabilities and Stockholders Equity
Amount Working
Non-controlling Interest 21,333 (70,000+20,000+95,000+28,333) * .10
Common stock 400,000
Other Contributed Capital 208,000
Retained Earnings 184,000
Total Stockholders’ Equity 792,000
Total Liabilities and Stockholders’ Equity 1,075,333
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