On January 1, 2016, Prima Company issued 1,500 of its $20 par value common shares with a fair value of $50 per share in exchange for 2,000 outstanding common shares of Swatch Company in a purchase transaction. Registration costs amounted to $1,700 paid in cash. Just prior to the acquisition, the balance sheets of the two companies were as follows: Cash Accounts Receivable (net) Inventory Plant and Equipment (net) Land Total Assets Accounts Payable Notes Payable Common Stock, $20 par value Other Contributed Capital Retained Earnings Total Liabilities and Equities Prima 95,000 58,000 95,000 Cash Land 26,000 60,000 39,000 $ 73,000 $ 347,000 $ 66,000 82,000 100,000 $ 347,000 Swatch $13,000 19,000 25,000 Common Stock Other Contributed Capital 43,000 20,000 $ 120,000 16,000 21,000 40,000 24,000 19,000 Any differences between the book value of equity and the value implied by the purchase price relates to Land. Required: $ 120,000 Prepare the journal entry on Prima's books to record the exchange of stock. Prepare a Computation and Allocation Schedule for the Difference between book value and value implied by the purchase price. Calculate the consolidated balance for each of the following accounts as of December 31, 2016:

On January 1, 2016, Prima Company issued 1,500 of its $20 par value common shares with a fair value of $50 per share in exchange for 2,000 outstanding common shares of Swatch Company in a purchase transaction. Registration costs amounted to $1,700 paid in cash. Just prior to the acquisition, the balance sheets of the two companies were as follows: Cash Accounts Receivable (net) Inventory Plant and Equipment (net) Land Total Assets Accounts Payable Notes Payable Common Stock, $20 par value Other Contributed Capital Retained Earnings Total Liabilities and Equities Prima 95,000 58,000 95,000 Cash Land 26,000 60,000 39,000 $ 73,000 $ 347,000 $ 66,000 82,000 100,000 $ 347,000 Swatch $13,000 19,000 25,000 Common Stock Other Contributed Capital 43,000 20,000 $ 120,000 16,000 21,000 40,000 24,000 19,000 Any differences between the book value of equity and the value implied by the purchase price relates to Land. Required: $ 120,000 Prepare the journal entry on Prima's books to record the exchange of stock. Prepare a Computation and Allocation Schedule for the Difference between book value and value implied by the purchase price. Calculate the consolidated balance for each of the following accounts as of December 31, 2016:

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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