Question

Pab Corporation decided to establish Sollon Company as a wholly owned subsidiary by transferring some of its existing assets and liabilities to the new entity. In exchange, Sollon issued Pab 32,000 shares of $6 par value common stock. The following information is provided on the assets and accounts payable transferred: 

Required: 

a. Prepare the journal entry that Pab recorded for the transfer of assets and accounts payable to Sollon (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

b. Prepare the journal entry that Sollon recorded for the receipt of assets and accounts payable from Pab. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) 

Answer 1

a) Journal entry in books of Pab Investment in Sollon Company common stock 343.000 Accumulated Depreciation-Buildings (178,000- 134,000) 44,000 Accumulated Depreciation Equipment (90,000-78,000) 12.000 Accounts payable 57,000 Cash 25,000 Inventory 85,000 o Land 78,000 1 Building 178,000 2 Equipment 90,000 3 4 Investment in Sollon Company common stock = Cash + Inventory+Land + Building + Equipment - Accumulated Depreciation-Buildings - Accumulated Depreciation Equipment - Accounts payable 5 =25000+85000+78000+178000-90000-44000-12000-57000 6 7 = 343,000 8 9

3 b) Journal entry in books of Sollon 1 2 Cash Inventory Land 5 Building 5 Equipment Accumulated Depreciation-Buildings (178,000- 134,000) 3 Accumulated Depreciation-Equipment (90,000-78,000) Accounts payable Common Stock ( 32,000*6) Additional Paid in Capital (343,000-192,000) 2 3 25,000 85,000 78,000 178,000 90,000 44,000 12,000 57,000 192,000 151,000 1

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