Question

Blank Corporation acquired 100 percent of Faith Corporation’s common stock on December 31, 20X2, for $214,000. Data from the balance sheets of the two companies included the following amounts as of the date of acquisition:

Item	Blank Corporation				Faith Corporation
Assets
Cash		$	70,000			$	24,000
Accounts Receivable			87,000				52,000
Inventory			101,000				64,000
Buildings and Equipment (net)			218,000				159,000
Investment in Faith Corporation Stock			214,000
Total Assets		$	690,000			$	299,000
Liabilities and Stockholders’ Equity
Accounts Payable		$	84,000			$	15,000
Notes Payable			140,000				70,000
Common Stock			93,000				44,000
Retained Earnings			373,000				170,000
Total Liabilities and Stockholders’ Equity		$	690,000			$	299,000

At the date of the business combination, the book values of Faith’s net assets and liabilities approximated fair value. Assume Faith Corporation’s accumulated depreciation on buildings and equipment on the acquisition date was $13,000.

Required:
a. Give the consolidation entry or entries needed to prepare a consolidated balance sheet immediately following the business combination. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Prepare a consolidated balance sheet worksheet. (Values in the first two columns (the "parent" and "subsidiary" balances) that are to be deducted should be indicated with a minus sign, while all values in the "Consolidation Entries" columns should be entered as positive values. For accounts where multiple adjusting entries are required, combine all debit entries into one amount and enter this amount in the debit column of the worksheet. Similarly, combine all credit entries into one amount and enter this amount in the credit column of the worksheet.)

Answer 1

Journal Entries-

S.No	Particulars	Debit	Credit
1	Investment a/c Dr	214000
	To Common stock		44000
	To paid in capital in excess of par (Being merger recorded)		170000
2.	Cash a/c Dr	24000
	Inventory Dr	52000
	Account receivable a/c Dr	64000
	Building & Equipment a/c Dr	159000
	To Accounts payable		15000
	To notes payable		70000
	To investments		214000

Consolidated Balance sheet

Item	Amount ($)
Assets
Cash (70000+24000)	94000
Accounts Receivable (87000+52000)	139000
Inventory (101000+64000)	165000
Buildings and Equipment (net) (218000+159000)	377000
Total Assets	775000
Liabilities and Stockholders’ Equity
Accounts Payable (84000+15000)	99000
Notes Payable (140000+70000)	210000
Common Stock	93000
Retained Earnings	373000
Total Liabilities and Stockholders’ Equity	775000