Assume that Big Company decides to acquire 100% Little Company for $500,000. Pre
ID: 2579334 • Letter: A
Question
Assume that Big Company decides to acquire 100% Little Company for $500,000. Prepare the appropriate journal entries. Big Company Balance Sheet Prepare the journal entries for acquiring 100% of the net assets of Little, accounting for it as a merger Prepare Elimination Entries for Stock Acquisition Assets, Liabilities & Equities Cash AR nventory Land PP&E; Accumulated Depreciation Patent Baok Value Account DR CR $2,100,000 Account CR $10,000 Cash $35,000 $10,000 $65,000 $40,000 $250,000 $200,000 $200,0 $40,000 nventor Land PP&E; Goodwill $150,000 $100,00 $100,00 $400,00 Total Assets $2,600,000 AP Common Stock Additional Pald In Capltal Which accounting method is most appropriate for representing an $100,0 Common Stock ($10 par) Additional Paid In Capital Retained Earnings $600,0 $1,450,000 2,600,000 Big Company Balance Sheet (Consolidated) investment of this type? Assets, Liabilities & Equities Book Value Total Liabilities & Equity Little Company Balance Sheet Assets, Liabilities & Equities Book Value $35,000 $10,000 $65,000 $40,000 AR nventory Land PP&E; Accumulated Depreciation Patent Prepare the journal entries for a 100% of Little Company, accounting for it using the equity method $150,000 Account CR Total Assets $400,000 $100,0 $100,0 Common Stock Additional Paid In Capital Retalned Earnings $50,000 $150,000 $400,000 Prepare the journal entries for a 100% Acquisition by issuing 10,000 shares of Blg Company Stock Account CR Total Labilities & Equity Assume that Book Value = Fair ValueExplanation / Answer
Which accounting method is most appropriate for representing an investment of this type?
In this situation the company should use equity method as the company can exercise its control over the operation of acquired company. The equity method helps in updating the investment acccount according to the performance of acquired company.
Which accounting method is most appropriate for representing an investment of this type?
In this situation the company should use equity method as the company can exercise its control over the operation of acquired company. The equity method helps in updating the investment acccount according to the performance of acquired company.
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