Question

Blank Corporation acquired 100 percent of Faith Corporation's common stock on December 31, 20X2, for $186,000. Data from the balance sheets of the two companies included the following amounts as of the date of acquisition Blank Corporation Corporation Faith Item Assets Cash Accounts Receivable Inventory Buildings and Equipment (net) Investment in Faith Corporation Stock 58,000 86,000 115,000 225,000 186,000 31,000 42,000 61,000 157,000 Total Assets $670,000 $291,000 Liabilities and Stockholders' Equity Accounts Payable Notes Payable Common Stock Retained Eanings $ 81,000$ 29,000 76,000 55,000 131,000 134,000 98,000 357,000 Total Liabilities and Stockholders' Equity $670,000 $291,000 At the date of the business combination, the book values of Faith's net assets and liabilities approximated fair value. Assume Faith Corporation's accumulated depreciation on buildings and equipment on the acquisition date was $24,000.

Answer 1

a) Journal Entries:

Event	Accounts	Debit	Credit
1	Investment in Faith	186000
	To Cash		186000
	(For acquisition)
2	Accumulated Depreciation	24000
	To Building & Equipment		24000

b)

BLANK AND SUBSIDIARY

Consolidated Balance sheet Worksheet

December 31, 20x2

	Blank	Faith	Debit	Credit	Consolidated
Assets
Cash	58000	31000			89000
Accounts Receivable	86000	42000			128000
Inventory	115000	61000			176000
Building & Equipment (Net)	225000	157000	24000	24000	382000
Investment in Faith	186000			186000	0
Total Assets	670000	291000	24000	210000	775000
Liabilities & Stockholders' Equity
Accounts payable	81000	29000			110000
Notes payable	134000	76000			210000
Common Stock	98000	55000	55000		98000
Retained Earnings	357000	131000	131000		357000
Total Liabilities & Stockholders, Equity	67000	291000	186000	0	775000