Exercise 3-3 On January 2, 2014, Prunce Company acquired 90% of the outstanding common stock of...

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Exercise 3-3 On January 2, 2014, Prunce Company acquired 90% of the outstanding common stock of...

Exercise 3-3

On January 2, 2014, Prunce Company acquired 90% of the outstanding common stock of Sun Company for $178,050 cash. Just before the acquisition, the balance sheets of the two companies were as follows:

	*Prunce*	*Sun*
Cash	$263,470	$ 60,730
Accounts receivable (net)	143,210	22,500
Inventory	110,480	56,650
Plant and equipment (net)	414,170	101,680
Land	59,220	29,600
Total asset	$990,550	$271,160

Accounts payable	$111,630	$ 50,670
Mortgage payable	67,840	40,000
Common stock, $2 par value	416,700	69,670
Other contributed capital	207,200	19,600
Retained earnings	187,180	91,220
Total equities	$990,550	$271,160

The fair values of Sun Company’s assets and liabilities are equal to their book values with the exception of land.

(a)

Prepare a journal entry to record the purchase of Sun Company’s common stock. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

Account Titles and Explanation	Debit	Credit

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Answer 1

Answer #1

(a)

Prepare a journal entry to record the purchase of Sun Company’s common stock

Account Titles and Explanation	Debit	Credit
Investment in Sun Company’s	$178,050
Cash		$178,050
(Being to record the purchase of Sun Company’s common stock)

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Answer 2

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Exercise 3-3 On January 2, 2014, Prunce Company acquired 90% of the outstanding common stock of...

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