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MarshaMarshaMarsha Inc. purchased 100% of the outstanding stock of Oh MyNose Inc. for purposes of horizontal consolidation and paid $2,000,000 cash for the stock. The balance sheets for the two companies immediately after the acquisition are as follows: Assets Book Value OhMyNose Inc. Balance Sheet as of 9/15/20X1 Fair Market Value Liabilities & Owners' Equity Book Value Fair Market Value $350.000 Assets MarshaMarshaMarsha Inc. Balance Sheet as of 9/15/20X1 Book Value $350 000 Liabilities & Owners' Equity Book Value 10.000

MarshaMarshaMarsha Inc. purchased 100% of the outstanding stock of Oh MyNose Inc. for purposes of horizontal consolidation and paid $2,000,000 cash for the stock. The balance sheets for the two companies immediately after the acquisition are as follows: Assets Book Value OhMyNose Inc. Balance Sheet as of 9/15/20X1 Fair Market Value Liabilities & Owners' Equity Book Value Fair Market Value $350.000 Assets MarshaMarshaMarsha Inc. Balance Sheet as of 9/15/20X1 Book Value $350 000 Liabilities & Owners' Equity Book Value 10.000

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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MarshaMarshaMarsha Inc. purchased 100% of the outstanding stock of Oh MyNose Inc. for purposes of horizontal consolidation and paid $2,000,000 cash for the stock. The balance sheets for the two companies immediately after the acquisition are as follows: Cash A/R Inventory Net Fixed Assets Trademarks Total Assets: Account Cash A/R Assets Inventory Net Fixed Assets Trademarks Investment in Subsidiary Book Value Goodwill A/P Notes Payable Bonds Payable Mortgage Payable Common Stock - Marsha(3) $1,000,000 Common Stock-Oh MyNose Retained Earnings-Marsha(3) Retained Earnings-Oh My Nose OhMyNose Inc. Balance Sheet as of 9/15/20X1 $0 $0 250,000 250,000 150,000 150,000 500,000 1,000,000 100,000 500,000 Fair Market Value Totals 0 2,000,000 0 (1,500,000) (500,000) (3,100,000) 0 SO Total Liabilities & O.E.: $1,000,000 $6,350,000 Total Liabilities & O.E.: A) Complete the below Consolidation Entries for the "Consolidation & Elimination Worksheet" for this acquisition as of the date of the acquisition by entering the proper debit and credit amounts in the gray-shaded cells below. Consolidation Entries Debit Entry Trial Balances Combined Marsha(3) Oh MyNose $750,000 $0 $750,000 500,000 250,000 750,000 600,000 150,000 750,000 2,500,000 500,000 3,000,000 100,000 100,000 2,000,000 0 (1,000,000) (250,000) (1,250,000) (250,000) (50,000) (300,000) 0 (500,000) (500,000) 0 (1,500,000) (500,000) (25,000) "A" (3,100,000) (175,000) "A" $0 (25,000) Liabilities & Owners' Equity Book Value $250,000 50,000 A/P Notes Payable Bonds Payable Total Liabilities: (175,000) $0 Common Stock Retained Earnings Total Equity: 0 Entry "B" "B" "C" 500,000 $800,000 "B" 25,000 175,000 $200,000 Fair Market Value $250,000 50,000 450,000 SO "A" "B" "C" Credit Cash A/R $0 Inventory Net Fixed Assets Investment in Subsidiary Assets Total Assets: Consolidated Balance $0 MarshaMarshaMarsha Inc. Balance Sheet as of 9/15/20X1 Book Value $750,000 500,000 600,000 2,500,000 2,000,000 Liabilities & Owners' Equity A/P Notes Payable Mortgage Payable Total Liabilities: Common Stock Retained Earnings Total Equity: Book Value $1,000,000 250,000 1,500,000 $2,750,000 500,000 3,100,000 $3,600,000 $6,350,000 Entry "A" Eliminate the subsidiary's equity against the parent's investment account Entry "B" Adjust the net assets of the subsidiary to Fair Market Value and offset to the investment Entry "C" Any remaining amount in the investment account gets eliminated to Goodwill
Transcribed Image Text:MarshaMarshaMarsha Inc. purchased 100% of the outstanding stock of Oh MyNose Inc. for purposes of horizontal consolidation and paid $2,000,000 cash for the stock. The balance sheets for the two companies immediately after the acquisition are as follows: Cash A/R Inventory Net Fixed Assets Trademarks Total Assets: Account Cash A/R Assets Inventory Net Fixed Assets Trademarks Investment in Subsidiary Book Value Goodwill A/P Notes Payable Bonds Payable Mortgage Payable Common Stock - Marsha(3) $1,000,000 Common Stock-Oh MyNose Retained Earnings-Marsha(3) Retained Earnings-Oh My Nose OhMyNose Inc. Balance Sheet as of 9/15/20X1 $0 $0 250,000 250,000 150,000 150,000 500,000 1,000,000 100,000 500,000 Fair Market Value Totals 0 2,000,000 0 (1,500,000) (500,000) (3,100,000) 0 SO Total Liabilities & O.E.: $1,000,000 $6,350,000 Total Liabilities & O.E.: A) Complete the below Consolidation Entries for the "Consolidation & Elimination Worksheet" for this acquisition as of the date of the acquisition by entering the proper debit and credit amounts in the gray-shaded cells below. Consolidation Entries Debit Entry Trial Balances Combined Marsha(3) Oh MyNose $750,000 $0 $750,000 500,000 250,000 750,000 600,000 150,000 750,000 2,500,000 500,000 3,000,000 100,000 100,000 2,000,000 0 (1,000,000) (250,000) (1,250,000) (250,000) (50,000) (300,000) 0 (500,000) (500,000) 0 (1,500,000) (500,000) (25,000) "A" (3,100,000) (175,000) "A" $0 (25,000) Liabilities & Owners' Equity Book Value $250,000 50,000 A/P Notes Payable Bonds Payable Total Liabilities: (175,000) $0 Common Stock Retained Earnings Total Equity: 0 Entry "B" "B" "C" 500,000 $800,000 "B" 25,000 175,000 $200,000 Fair Market Value $250,000 50,000 450,000 SO "A" "B" "C" Credit Cash A/R $0 Inventory Net Fixed Assets Investment in Subsidiary Assets Total Assets: Consolidated Balance $0 MarshaMarshaMarsha Inc. Balance Sheet as of 9/15/20X1 Book Value $750,000 500,000 600,000 2,500,000 2,000,000 Liabilities & Owners' Equity A/P Notes Payable Mortgage Payable Total Liabilities: Common Stock Retained Earnings Total Equity: Book Value $1,000,000 250,000 1,500,000 $2,750,000 500,000 3,100,000 $3,600,000 $6,350,000 Entry "A" Eliminate the subsidiary's equity against the parent's investment account Entry "B" Adjust the net assets of the subsidiary to Fair Market Value and offset to the investment Entry "C" Any remaining amount in the investment account gets eliminated to Goodwill
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