Ch2(1)

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School

University of Houston, Downtown *

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Course

6315

Subject

Accounting

Date

Apr 3, 2024

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pdf

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3/28/24, 9:42 PM Assignment Print View https://ezto.mheducation.com/api/caa/activity/C15Print?jwt=eyJhbGciOiJSUzI1NiJ9.eyJlbnZpcm9ubWVudCI6InByb2QiLCJpc3MiOiJlenQiLCJwcmlud… 2/4 1. Award: 25 out of 25.00 points Blank Corporation acquired 100 percent of Faith Corporation’s common stock on December 31, 20X2, for $150,000. Data from the balance sheets of the two companies included the following amounts as of the date of acquisition: Item Blank Corporation Faith Corporation Assets Cash $ 65,000 $ 18,000 Accounts Receivable 87,000 37,000 Inventory 110,000 60,000 Buildings and Equipment (net) 220,000 150,000 Investment in Faith Corporation Stock 150,000 Total Assets $ 632,000 $ 265,000 Liabilities and Stockholders’ Equity Accounts Payable $ 92,000 $ 35,000 Notes Payable 150,000 80,000 Common Stock 100,000 60,000 Retained Earnings 290,000 90,000 Total Liabilities and Stockholders’ Equity $ 632,000 $ 265,000 At the date of the business combination, the book values of Faith’s net assets and liabilities approximated fair value. Assume that Faith Corporation’s accumulated depreciation on buildings and equipment on the acquisition date was $30,000. Required: a. Give the consolidation entry or entries needed to prepare a consolidated balance sheet immediately following the business combination. b. Prepare a consolidated balance sheet worksheet. Required A Required B Complete this question by entering your answers in the tabs below. Give the consolidation entry or entries needed to prepare a consolidated balance sheet immediately following the business combination. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Required A Required B No Event Accounts Debit Credit A 1 Common stock 60,000 Retained earnings 90,000 Investment in Faith 150,000 B 2 Accumulated depreciation 30,000 Buildings & equipment 30,000 References

3/28/24, 9:42 PM Assignment Print View https://ezto.mheducation.com/api/caa/activity/C15Print?jwt=eyJhbGciOiJSUzI1NiJ9.eyJlbnZpcm9ubWVudCI6InByb2QiLCJpc3MiOiJlenQiLCJwcmlud… 3/4 Consolidating Entries Learning Objective: 02-05 Make calculations and prepare basic consolidation entries for a simple consolidation. Difficulty: 2 Medium Learning Objective: 02-06 Prepare a consolidation worksheet. Blank Corporation acquired 100 percent of Faith Corporation’s common stock on December 31, 20X2, for $150,000. Data from the balance sheets of the two companies included the following amounts as of the date of acquisition: Item Blank Corporation Faith Corporation Assets Cash $ 65,000 $ 18,000 Accounts Receivable 87,000 37,000 Inventory 110,000 60,000 Buildings and Equipment (net) 220,000 150,000 Investment in Faith Corporation Stock 150,000 Total Assets $ 632,000 $ 265,000 Liabilities and Stockholders’ Equity Accounts Payable $ 92,000 $ 35,000 Notes Payable 150,000 80,000 Common Stock 100,000 60,000 Retained Earnings 290,000 90,000 Total Liabilities and Stockholders’ Equity $ 632,000 $ 265,000 At the date of the business combination, the book values of Faith’s net assets and liabilities approximated fair value. Assume that Faith Corporation’s accumulated depreciation on buildings and equipment on the acquisition date was $30,000. Required: a. Give the consolidation entry or entries needed to prepare a consolidated balance sheet immediately following the business combination. b. Prepare a consolidated balance sheet worksheet.

3/28/24, 9:42 PM Assignment Print View https://ezto.mheducation.com/api/caa/activity/C15Print?jwt=eyJhbGciOiJSUzI1NiJ9.eyJlbnZpcm9ubWVudCI6InByb2QiLCJpc3MiOiJlenQiLCJwcmlud… 4/4 Required A Required B Complete this question by entering your answers in the tabs below. Give the consolidation entry or entries needed to prepare a consolidated balance sheet immediately following the business combination. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Required A Required B No Event Accounts Debit Credit A 1 Common stock 60,000 Retained earnings 90,000 Investment in Faith 150,000 B 2 Accumulated depreciation 30,000 Buildings & equipment 30,000 Explanation: a. Equity Method Entries on Blank's Books: General Journal Debit Credit Investment in Faith 150,000 Cash 150,000 Record the initial investment in Faith 12/31/X2 Goodwill = 0 $150,000 Initial investment in Faith Identifiable excess = 0 Book value = CS + RE = 150,000 Book Value Calculations: Total Book Value = Common Stock + Retained Earnings Ending book value 150,000 60,000 90,000

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