. Prepare journal entries for Axel Corp. to record the acquisition of Wheal Company
Axel Corporation acquires 100% of the stock of Wheal Company on December 31, Year 4. The
following information pertains to Wheal Company on the date of acquisition:
Book Value Fair Value
Cash......................................................... $ 40,000 $ 40,000
Inventory................................................... 50,000 75,000
Property, plant, and equipment (net)........ 100,000 200,000
Secret formula (patent) ............................ — 30,000
Total assets .............................................. $250,000 $400,000
Accounts payable ..................................... $ 30,000 $ 30,000
Accrued employee pensions...................... 20,000 22,000
Long-term debt......................................... 40,000 38,000
Capital stock ............................................ 100,000 —
Other contributed capital ......................... 25,000 —
Total liabilities and equity ........................ $250,000 $ 90,000
Axel Corporation issues $110,000 par value ($350,000 market value on December 31, Year 4) of
its own stock to the shareholders of Wheal Company to consummate the transaction, and Wheal
Company becomes a wholly owned, consolidated subsidiary of Axel Corporation.
Required:
a. Prepare
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