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When it purchased Sutton, Inc. on January 1, 20X1, Pavin Corporation issued 500,000 shares of its $5 par voting common stock. On that date the fair value of those shares totaled $4,200,000. Related to the acquisition, Pavin had payments to the attorneys and accountants of $200,000, and stock issuance fees of $100,000. Immediately prior to the purchase, the equity sections of the two firms appeared as follows:
|
|
Pavin |
Sutton |
|
Common stock |
$ 4,000,000 |
$ 700,000 |
|
Paid-in capital in excess of par |
7,500,000 |
900,000 |
|
|
5,500,000 |
500,000 |
|
Total |
$17,000,000 |
$2,100,000 |
Immediately after the purchase, the consolidated
|
a. |
$6,000,000 |
|
b. |
$5,800,000 |
|
c. |
$5,500,000 |
|
d. |
$5,300,000 |
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- Peal Corporation Issued 4,000 shares of Its $10 par value stock with a market value of $85,000 to acquire 85 percent of the common stock of Seed Company on August 31, 20X3. Seed's fair value was determined to be $100,000 on that date. Peal had previously purchased 15 percent of Seed's common stock for $9,000 on January 31, 20X1, and had carried this Investment at fair value on Its balance. Peal reported this Investment at $15,000 on Its balance sheet at August 31, 20X3, Immediately prior to acquiring the remaining 85 percent of Seed's shares. On August 31, 20X3, Peal also paid appraisal fees of $3,500 and stock Issue costs of $2,000 Incurred in completing the acquisition of the additional shares. Required: Prepare the Journal entries to be recorded by Peal in completing the acquisition of the additional shares of Seed. Note: If no entry is required for a transaction/event, select "No Journal entry required" In the first account field. No A B C Event 1 2 3 Acquisition Expense Cash…Sunland Corporation purchased 370 shares of Sherman Inc. common stock for $ 13,100 ( Sunland does not have significant influence). During the year, Sherman paid a cash dividend of $ 3.00 per share. At year-end, Sherman stock was selling for $ 37.50 per share.Prepare Sunland's journal entries to record (a) the purchase of the investment, (b) the dividends received, and (c) the fair value adjustment. (Assume a zero balance in the Fair Value Adjustment account.) (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) No. Account Titles and Explanation Debit Credit (a) enter an account title to record the purchase of the investment enter a debit amount enter a credit amount enter an account title to record the purchase of the investment enter a debit amount enter a credit amount (b) enter an account title to record…Palm Corporation and Staple Company have announced terms of an exchange agreement under which Palm will issue 8,500 shares of its $15 par value common stock to acquire all of Staple Company’s assets. Palm shares currently are trading at $59, and Staple $10 par value shares are trading at $23 each. Historical cost and fair value balance sheet data on January 1, 20X2, are as follows: Palm Corporation Staple Company Balance Sheet Item Book Value Fair Value Book Value Fair Value Assets Cash & Receivables $ 151,000 $ 151,000 $ 46,000 $ 46,000 Land 110,000 190,000 57,000 83,000 Buildings & Equipment (net) 313,000 411,000 176,000 230,000 Total Assets $ 574,000 $ 752,000 $ 279,000 $ 359,000 Equities Common Stock $ 200,000 $ 81,000 Additional Paid-In Capital 18,000 9,900 Retained Earnings…
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- Tamarisk Corporation purchased 380 shares of Sherman Inc. common stock for $13,300 (Tamarisk does not have significant influence). During the year, Sherman paid a cash dividend of $3.25 per share. At year-end, Sherman stock was selling for $37.00 per share.Prepare Tamarisk's journal entries to record (a) the purchase of the investment, (b) the dividends received, and (c) the fair value adjustment. (Assume a zero balance in the Fair Value Adjustment account.) (On January 1, 2018, the Moody Company entered into a transaction for 100% of the outstanding common stock of Osorio Company. To acquire these shares, Moody issued $400 in long-term liabilities and also issued 40 shares of common stock having a par value of $1 per share but a fair value of $10 per share. Moody paid $20 to lawyers, accountants, and brokers for assistance in bringing about this acquisition. Another $15 was paid in connection with stock issuance costs. Prior to these transactions, the balance sheets for the two companies were as follows: Moody Osorio Cash $ 180 $ 40 Receivables 810 180 Inventories 1,080 280 Land 600 360 Buildings (net) 1,260 440 Equipment (net) 480 100 Accounts payable (450 ) (80 ) Long-term liabilities (1,290 ) (400 ) Common stock ($1 par) (330 ) Common stock ($20 par) (240 ) Additional paid-in capital (1,080 ) (340 ) Retained…On January 1, Barnyard Corporation acquired common stock of Fresh Hay Corporation. At the time of acquisition, the book value and the fair value of Fresh Hay Corporation's net assets were $1 billion. During the year, Fresh Hay Corporation reported net income of $480 million and declared dividends of $160 million. The fair value of the shares increased by 10 percent during the year. How much income would Barnyard Corporation report for the year related to its investment under the assumption that it: A. Paid $150 million for 15 percent of the common stock and uses the fair value method to account for its investment in Fresh Hay Corporation. (Pay attention to the "fair value method" mention, others who attempted to answer this question got it wrong because they missed that). B. Paid $300 million for 30 percent of the common stock and uses the equity method to account for its investment in Fresh Hay Corporation. Please show all your steps so we can follow what…
