Question

Sub Co. Sub Co Book Value Fair Valu 500,000 400.000 100.000 250,000 100,000 (50,000) 300,000 10. On December 31, 2020, Parent Co acquired all of the assets and liabilities of Sub Co in a statutory merger. Parent Co paid $400,000 in cash along Sales with 15,000 shares with a par value of $1 and a Expenses current fair value of $10 per share. There were Net Income $10,000 in legal fees paid in connection to the acquisition and $1,000 paid in connection to issuing RE, Jan! new common shares. Sub Co.'s financials prior to Net Income acquisition along with their fair value are listed to Dividends Paid the left. RE, Dec 31 a. Prepare all entries required to be entered Current Assets by Parent Co. in connection to this Land acquisition Building (net) Patent b. Assume the same facts as in part 2, except that the purchase price was only the Equipment (net) $400,000 in cash. Prepare all entries Total Assets required to be entered by Parent Co in connection to this acquisition Liabilities Common Stock APIC RE Dec 31 Total Liab & SE 50.000 200,000 100,000 50,000 225,000 125.000 50,000 110,000 100,000 450.000 60.000 50,000 10,000 90.000 300,000 450,000

Answer 1

Part A

Fair value of total Assets (50000+225000+125000+50000+110000))		$            560,000
Less: Total Liabilities at fair value		$               60,000
Net Assets		$            500,000
Consideration paid including cash ((15000*10)+400000)		$            550,000
Less: Net Assets		$            500,000
Value of Goodwill		$               50,000

Event	Account title and explanation	Debit	Credit
a	Merger Expense	10,000
	Deferred Stock Issue Costs	1,000
	Cash		11,000
	(To record common stock issuance costs.)
b	Current assets	50,000
	Land	225,000
	Buildings	125,000
	Patent	50,000
	Equipment	110,000
	Goodwill	50,000
	Liabilities		60,000
	Cash		400,000
	Common Stock (15000 * 1 par value)		15,000
	Additional Paid-In Capital (10-1=9) ((15000*9)-1000)		134,000
	Deferred Stock Issue Costs		1,000
	(To record acquisition of subsidiary company)

Part B

Fair value of total Assets (50000+225000+125000+50000+110000))		$            560,000
Less: Total Liabilities at fair value		$               60,000
Net Assets		$            500,000
Consideration paid including cash		$            400,000
Less: Net Assets		$            500,000
Value of Goodwill (Gain)		$          (100,000)
Extraordinary Gain		$            100,000

Event	Account title and explanation	Debit	Credit
a	Merger Expense	10,000
	Deferred Stock Issue Costs	1,000
	Cash		11,000
	(To record common stock issuance costs.)
b	Current assets	50,000
	Land	225,000
	Buildings	125,000
	Patent	50,000
	Equipment	110,000
	Liabilities		60,000
	Cash		400,000
	Extraordinary Gain		100,000
	(To record acquisition of subsidiary company)