Question

Question 29 Not yet answered Marked out of 54.00 P Flag question Consolidation at date of acquisition (purchase price equals book value) A parent company acquires its subsidiary by exchanging 50,000 shares of its Common Stock, with a fair value on the acquisition date of 524 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 date of acquisition balance sheets of the parent and subsidiary appearing in parte below. Credit Consolidation Worksheet Description Debit [E] Common stock APIC . Consolidated c. Prepare the consolidated balance sheet on the date of acquisition Elimination Entries Balance Sheet Parent Subsidiary DI Assets Cash $450.000 5271.200 Accounts receivable 1.500.000 417,600 Inventory 2.300.000 536,400 Equity investment 1.200.000 MacBook Pro

Answer 1

a.)

Total fair value of subsidiary on acquisition date

$1,200,000

(120,000 + 150,000 + 930,000 )

b.)	Consolidation worksheet
		Description	Debit $	Credit $
	E	Common Stock	120,000
	E	APIC	150,000
	E	Retained Earnings	930,000
	E	Equity Investment		1,200,000

c.)	Consolidated Balance Sheet
				Elimination	Entries	Amount in $
	Balance Sheet	Parent	Subsidiary	Dr	Cr	Consolidated
	Assets
	Cash	480,000	271,200			751,200
	Accounts Receivable	1,500,000	417,600			1,917,600
	Inventory	2,300,000	536,400			2,836,400
	Equity Investment	1,200,000	-		1,200,000	-
	Property , Plant & Equipment, net	11,150,000	992,400			12,142,400
		16,630,000	2,217,600			17,647,600
	Liabilities & Stockholder' equity
	Accounts Payable	750,000	152,400			902,400
	Accrued Liabilities	880,000	265,200			1,145,200
	Long Term Liabilities	3,500,000	600,000			4,100,000
	Common Stock	1,600,000	120,000	120,000		1,600,000
	APIC	3,800,000	150,000	150,000		3,800,000
	Retained earnings	6,100,000	930,000	930,000		6,100,000
		16,630,000	2,217,600			17,647,600