Question

Consolidation at date of acquisition (purchase price equals book value)

59. Consolidation at date of acquisition (purchase price equals book value) A parent company acquires its subsidiary by exchanging 30,000 shares of its Common Stock, with a fair value on the acquisition date of $20 per share, for all of the outstanding voting shares of the investee. a. What is the total fair value of the subsidiary on the acquisition date? b. Prepare the consolidation entry or entries on the date of acquisition given the following balance sheets of the parent and subsidiary on the date of acquisition. Balance Sheet Parent Subsidiary Assets Cash.......... ...... $ 200,000 $100,000 Accounts receivable........ 300,000 200,000 Inventory 500,000 400,000 Equity investment. 600,000 Property, plant and equipment (PPE), net.. 1,000,000 600,000 $2,600,000 $1,300,000 Liabilities and stockholders' equity Accounts payable...... ...... $ 100,000 $100,000 iabilities ................................................ 200,000 200,000 Long-term liabilities ..... 800,000 400,000 Common stock ........ 300,000 120,000 APIC.......................................................... 500,000 180,000 Retained earnings ................................... 700,000 300,000 $2,600,000 $1,300,000 Activate Windows c. Prepare the consolidated balance sheet on the date of acquisition. Go to Settings to activate Windows.

Answer 1

Above question is about consolidation. Refer below images for more detailed solution.
Solution ! @ : f Requirement the subsidiary What is on the the total acquisition fair vawe date 2 Total fair value of subsidiary (on acquisition date) - 30000 Shares & $20 per share $600000 Requirement 6 : consolidation entry cor) entries : De bit credit or particolars Common Stock Ale or APIC Al Detained earnings Al or TO equity investment the $120000 $ 180000 $300000 $ 600000

prepare the : consolidated balance Requirement sheet on the date of acquisition : Elimination Entries Consolidated Balance Sheet parent D8 subsidiary $300000 $500 000 900000 Assets : cash Accounts Receivable Inventory Equity inustment property, plant & $ 200 000 $300000 $500000 $600000 $1000 000 100000 $200000 $40000 - $ 600000 $600 000 yo $1600 000 $33 00000 equipment (net) $2600000 $1300000 Liabilities g Stockholders equity : Accounts payable Accroed liabilities Long term liabilittes $ 200 000 $ 400 000 11200000 & 10oooo $200000 &200000 3300000 $500000 & 700 000 $100000 $200 000 $ 400.000 $120000 & 180000 & 300000 & 300000 $ 500 000 $0 $0 so Common Stock 120000 $180 000 300000 700000 APIC Retained earnings $600.000 $3300000 & 1300000 $600.000 $2600000