Barton Corp acquired 100% of Google Inc. on January 1, 2020, in exchange for cash. The...
Barton Corp acquired 100% of Google Inc. on January 1, 2020, in exchange for cash. The book value of Google's individual assets and Liabilities approximated their acquisition-date fair values. On the date of acquisition, Google reported the following
| cash | 350,000 | Current Liabilities | 120,000 |
| Inventory | 100,000 | ||
| Plant Assets | 320,000 | Common Stock | 100,000 |
| Property | 500,000 | Retained Earnings | 1,050,000 |
| Total Assets | 1,270,000 | Total Liabilities & Equities | 1,270,000 |
During the year google inc. reported 310,000 in net income and declared 15,000 in dividends. Barton corp accounts for their investment using the equity method.
A. What journal entry will Baton Corp make on the date of acquisition to record the investment in Google inc?
B. Prepare a consolidating balance sheet of Barton and Google immediately after the acquisition
C. Show the journal entries Barton recorded for the income and dividend declared by google throughout the year using the equity method
D. Prepare a consolidating Balance sheet, including eliminations, for December 31, 2020
I was told by my professor that the transactions between the Barton company and google create a balance sheet for Barton
Homework Answers
| Calcultaion of Purchase Price | |
| Purchase price = Net asset Value | |
| Total Assets | $ 1,270,000 |
| Less: Current Liabilities | $ (120,000) |
| purchase Price | $ 1,150,000 |
| Value of Investments on 1st Jan 2020 | $ 1,150,000 |
| Add: Barton's share in profit of Google | $ 310,000 |
| 310000*100% | |
| Less: Dividends declared | $ (15,000) |
| 15000*100% | |
| Value of Investments on 31st dec 2020 | $ 1,445,000 |
| Account | Debit | Credit | ||
| Investment | $ 1,150,000 | |||
| Cash | $ 1,150,000 | |||
| Investment entry recorded | ||||
| Investment | $ 310,000 | |||
| Profit and loss | $ 310,000 | |||
| profit's share of Google recorded | ||||
| Profit and loss | $ 15,000 | |||
| Investment | $ 15,000 | |||
| Dividend's share of Google recorded | ||||
Balance sheet of Barton is not given, assuming that all the figures would be added in it, only investment would be show as additional item on asset side at
| $ 1,150,000 |
and cash would be reduced by same amount.
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