Balance Sheet Totals of Parent Company
Foster Corporation established Kline Company as a wholly owned subsidiary. Foster reported the following balance sheet amounts immediately before and after it transferred assets and accounts payable to Kline Company in exchange for 4,000 shares of $12 par value common stock:
| Amount Reported |
| ||
Before Transfer | After Transfer |
| ||
Cash |
| $ 40,000 |
| $ 25,000 |
Accounts Receivable |
| 65,000 |
| 41,000 |
Inventory |
| 30,000 |
| 21,000 |
Investment in Kline Company |
|
|
| 66,000 |
Land |
| 15,000 |
| 12,000 |
Depreciable Assets | $180,000 |
| $115,000 |
|
Accumulated Depreciation | 75,000 | 105,000 | 47,000 | 68,000 |
Total Assets |
| $255,000 |
| $233,000 |
Accounts Payable |
| $ 40,000 |
| $ 18,000 |
Bonds Payable |
| 80,000 |
| 80,000 |
Common Stock |
| 60,000 |
| 60,000 |
Retained Earnings |
| 75,000 |
| 75,000 |
Total Liabilities and Equities |
| $255,000 |
| $233,000 |
Required
a. Give thejournal entry that Foster recorded when it transferred its assets and accounts payable to Kline.
b. Give thejournal entry that Kline recorded upon receipt of the assets and accounts payable from Foster.
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