Homework Answers
Ans- Shareholder's Equity Section
| Description | Amount ($) |
| Capital stock, $10 par, 600,000 shares outstanding (300,000*$20) | $6,000,000 |
| Other paid-in capital | $3,390,000 |
| Retained earnings | $1,180,000 |
| Total Stockholders' equity | $10,570,000 |
Working Note-1
Calculate other paid-in capital as mentioned below:-
Other paid-in capital= Opening balance+Shares issued to Son-Shares given for registration
=$400,000+$3,000,000-$10,000
=$3,390,000
2- Calculate the retained earnings as follow:-
Retained earnings= Opening balance- Cost for combination
=$1,200,000-$20,000
=$1,180,000
Journal Entries
| Date | Account Title and Explanation | Debit ($) | Credit ($) |
| Jan.2 | Investment in Son | 6,000,000 | |
| Capital Stock | 3,000,000 | ||
| Other paid-in capital | 3,000,000 | ||
| (To record the business acquisition) | |||
| Jan.2 | Investment Expense | 20,000 | |
| Other paid-in capital | 10,000 | ||
| Cash | 30,000 | ||
| (To record the expense on acquisition and issue of shares) |
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