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GAGA Company and Little Bieber Company had the following balance sheets on Janua

ID: 2444845 • Letter: G

Question

GAGA Company and Little Bieber Company had the following balance sheets on January 1, 2015

GAGA

Little Bieber

Cash

2,000,000

40,000

Inventory

1,000,000

90,000

Equipment

2,000,000

500,000

a/d equipment

-1,000,000

-200,000

Total Assets

4,000,000

430,000

accts payable

1,000,000

20,000

Common stock

2,000,000

10,000

retained earnings

1,000,000

400,000

On January 2nd GAGA purchased 80% of Little Bieber from Little Bieber’s stockholders for $750,000. At that time Little Bieber’s equipment was worth $400,000 with all other assets and liabilities having a book value equal to their fair market value.

REQUIRED;

A) MAKE THE JOURNAL ENTRY GAGA MAKES WHEN IT BUYS THE 80% OF LITTLE BIEBER

B) MAKE THE JOURNAL ENTRY LITTLE BIEBER MAKES WHEN 80% OF ITS STOCK IS PURCHASED BY GAGA

C) MAKE A CONSOLIDATED BALANCE SHEET ON JANUARY 2ND (DON’T FORGET GAGA SPENT $750,000 )

a)MAKE THE NECESSARY ELIMINATION ENTRIES

GAGA

Little Bieber

Cash

2,000,000

40,000

Inventory

1,000,000

90,000

Equipment

2,000,000

500,000

a/d equipment

-1,000,000

-200,000

Total Assets

4,000,000

430,000

accts payable

1,000,000

20,000

Common stock

2,000,000

10,000

retained earnings

1,000,000

400,000

Explanation / Answer

A.

B. No entry in books of Little Bieber

C. Consolidated Balance Sheet

Workings

Consolidated Balance Sheet

Dr/Cr Debit Credit Investment in Little Bieber Dr 750000 Cash Cr 750000