Creation of New Subsidiary
Lester Company transferred the following assets to a newly created subsidiary, Mumby Corporation, in exchange for 40,000 shares of its $3 par value stock:
| Cost | Book Value |
Cash | $ 40,000 | $ 40,000 |
Accounts Receivable | 75,000 | 68,000 |
Inventory | 50,000 | 50,000 |
Land | 35,000 | 35,000 |
Buildings | 160,000 | 125,000 |
Equipment | 240,000 | 180,000 |
Required
a. Give the journal entry in which Lester recorded the transfer of assets to Mumby Corporation.
b. Give the journal entry in which Mumby recorded the receipt of assets and issuance of common stock to Lester.
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