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ID: 2437507 • Letter: T
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Title Subtitle ·?? .ca . _ . LTNormal 11No Spac..._ Heading 1 Heading 2 . . Styles Paragraph I. (26 points) On 01/01/2014, Company Big (B) acquired 25% of Company Small (S)'s shares. To acquire the shares, B borrowed S 4,000,000 from bank, paid another 1,000,000 cash out of their own bank account, and issued 100,000 shares to the former shareholders of S. The shares issued have $50 market value per share and S1 face value. In 2015, S made a net profit of $4,000,000, announced and gave out 1,000,000 cash dividend. The share price of S were $15 per share at 01/01/2014 and S18 per share at 12/31/2014. a. For the transaction happened on 01/01/2014, please write down the journal entries for B (5 points) 25 DOLL F8 F4 F5 F6 8Explanation / Answer
Transaction for B on 1 Jan 2014
a) Borrowings from Bank
Cash.......................................Dr 4,000,000
....... Bank Loan..................................Cr 4,000,000
b) Acquired Shares of S
Investment in Shares od S.................................... Dr 9,100,000
...... Cash............................................................................. Cr 4,100,000
...... Common Stock...............................................................Cr 100,000
....... Paid in Capital in excess of par........................................Cr 4,900,000
**
Cash = Borrowing + Own = 4000000+100000 = 4100000
Common Stock = 100000 Shares of $ 1 face Value = $ 100,000
Paid in Capital = 100000 Shares of $ 50 over $ 1 face Value = 100000*(50-1) = 4,900,000
Total Consideration for Shares = 4,100,000 + 100,000 + 4,900,000 = 9,100,000
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