Consolidation at date of acquisition (purchase price
equals book value)
A parent company acquires its subsidiary by exchanging 45,000
shares of its Common Stock, with a market value on the acquisition
date of $25 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?
$Answer
b. Given the balance sheets of the parent and subsidiary in c. below, prepare the consolidation entry or entries on the date of acquisition.
Consolidation WorkSheet | |||
---|---|---|---|
Description | Debit | Credit | |
Answer[C][E][A][D][I] | Common stock | Answer | Answer |
APIC | Answer | Answer | |
AnswerEquity investmentCommon stockAPICRetained earnings | Answer | Answer | |
AnswerEquity investmentCommon stockAPICRetained earnings | Answer | Answer | |
c. Prepare the consolidated balance sheet on the date of acquisition.
Elimination Entries | |||||||
---|---|---|---|---|---|---|---|
Balance Sheet | Parent | Subsidiary | Dr | Cr | Consolidated | ||
Assets | |||||||
Cash | $405,000 | $226,000 | $Answer | ||||
Accounts receivable | 1,280,000 | 348,000 | Answer | ||||
Inventory | 1,940,000 | 447,000 | Answer | ||||
Equity investment | 1,125,000 | Answer | Answer | Answer | |||
Property, plant and equipment (PPE), net | 9,332,000 | 952,000 | Answer | ||||
$14,082,000 | $1,973,000 | $Answer | |||||
Liabilities and stockholders' equity | |||||||
Accounts payable | $627,000 | $127,000 | $Answer | ||||
Accrued liabilities | 736,000 | 221,000 | Answer | ||||
Long-term liabilities | 3,000,000 | 500,000 | Answer | ||||
Common stock | 1,370,000 | 100,000 | Answer | Answer | Answer | ||
APIC | 3,325,000 | 125,000 | Answer | Answer | Answer | ||
Retained earnings | 5,024,000 | 900,000 | Answer | Answer | Answer | ||
$14,082,000 | $1,973,000 | Answer | Answer | $Answer |
Solution.
a. What is the total fair value of the subsidiary on the acquisition date.
Total fair value of the subsidiary = 45,000 Share x $25 = $1,125,000.
b.
Consolidation WorkSheet | |||
Description | Debit | Credit | |
Common stock | 100,000 | 0 | |
APIC | 125,000 | 0 | |
Retained earnings | 900,000 | 0 | |
Equity investment | 0 | 1,125,000 |
C.
Elimination Entries | |||||||
Balance Sheet | Parent | Subsidiary | Dr | Cr | Consolidated | ||
Assets | |||||||
Cash | $405,000 | $226,000 | 631,000 | ||||
Accounts receivable | 1,280,000 | 348,000 | 1,628,000 | ||||
Inventory | 1,940,000 | 447,000 | 2,387,000 | ||||
Equity investment | 1,125,000 | 1,125,000 | - | ||||
Property, plant and equipment (PPE), net | 9,332,000 | 952,000 | 10,284,000 | ||||
$14,082,000 | $1,973,000 | 14,930,000 | |||||
Liabilities and stockholders' equity | |||||||
Accounts payable | $627,000 | $127,000 | 754,000 | ||||
Accrued liabilities | 736,000 | 221,000 | 957,000 | ||||
Long-term liabilities | 3,000,000 | 500,000 | 3,500,000 | ||||
Common stock | 1,370,000 | 100,000 | 100,000 | 0 | 1,370,000 | ||
APIC | 3,325,000 | 125,000 | 125,000 | 0 | 3,325,000 | ||
Retained earnings | 5,024,000 | 900,000 | 900,000 | 0 | 5,024,000 | ||
$14,082,000 | $1,973,000 | 1,125,000 | 1,125,000 | 14,930,000 |
Consolidation at date of acquisition (purchase price equals book value) A parent company acquires its subsidiary...
Consolidation at date of acquisition (purchase price equals book value) A parent company acquires its subsidiary by exchanging 45,000 shares of its Common Stock, with a market value on the acquisition date of $25 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. Given the balance sheets of the parent and subsidiary in c. below, prepare the consolidation entry or entries on...
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...
Consolidation at date of acquisition (purchase price greater than book value, acquisition journal entries Assume that the parent company acquires its subsidiary by exchanging 84,000 shares of its $2 par value Common Stock, with a fair value on the acquisition date of $41 per share, for all of the outstanding voting shares of the investee. In its analysis of the investee company, the parent values all of the subsidiary’s assets and liabilities at an amount equaling their book values except...
Consolidation at date of acquisition (purchase price greater than book value, acquisition journal entries Assume that the parent company acquires its subsidiary by exchanging 84,000 shares of its $2 par value Common Stock, with a fair value on the acquisition date of $45 per share, for all of the outstanding voting shares of the investee. In its analysis of the investee company, the parent values all of the subsidiary’s assets and liabilities at an amount equaling their book values except...
Consolidation at date of acquisition (purchase price greater than book value, acquisition journal entries Assume that the parent company acquires its subsidiary by exchanging 84,000 shares of its $2 par value Common Stock, with a fair value on the acquisition date of $42 per share, for all of the outstanding voting shares of the investee. In its analysis of the investee company, the parent values all of the subsidiary's assets and liabilities at an amount equaling their book values except...
Consolidation at date of acquisition (purchase price greater than book value, acquisition journal entries, deferred tax liability) Assume that the parent company acquires its subsidiary by exchanging 118,000 shares of its $1 par value Common Stock, with a market value on the acquisition date of $30 per share, for all of the outstanding voting shares of the investee. In its analysis of the investee company, the parent values all of the subsidiary's assets and liabilities at an amount equaling their...
Consolidation at date of acquisition (purchase price greater than book value, acquisition journal entries, deferred tax liability) Assume that the parent company acquires its subsidiary by exchanging 116,000 shares of its $1 par value Common Stock, with a market value on the acquisition date of $30 per share, for all of the outstanding voting shares of the investee. In its analysis of the investee company, the parent values all of the subsidiary's assets and liabilities at an amount equaling their...
Consolidation at date of acquisition (purchase price greater than book value, acquisition journal entries, deferred tax liability) Assume that the parent company acquires its subsidiary by exchanging 118,000 shares of its $1 par value Common Stock, with a market value on the acquisition date of $30 per share, for all of the outstanding voting shares of the investee. In its analysis of the investee company, the parent values all of the subsidiary's assets and liabilities at an amount equaling their...
Consolidation at date of acquisition (purchase price greater than book value, acquisition journal entries Assume that the parent company acquires its subsidiary by exchanging 84,000 shares of its $2 par value Common Stock, with a fair value on the acquisition date of $42 per share, for all of the outstanding voting shares of the investee. In its analysis of the investee company, the parent values all of the subsidiary's assets and liabilities at an amount equaling their book values except...
Consolidation entries at date of acquisition (purchase price greater than book value) A parent company acquires all of the outstanding common stock of its subsidiary for cash purchase price of $530,000. On the acquisition date, the subsidiary reported $120,000 for Common Stock and $90,000 for Retained Earnings. An examination of the subsidiary's balance sheet revealed that book values were equal to fair values for all assets, except for an unrecorded patent, which the parent values at $190,000. a. Prepare the...