On January 1, 2023, Parent Corporation exchanged $600,000 cash for 100 percent of the outstanding voting stock of Subsidiary Corporation. Parent plans to maintain Subsidiary as a wholly owned subsidiary with separate legal status and accounting information systems. At the date of acquisition, the book value of Subsidiary's net assets equaled fair market value except for the following: Inventory Land Cash Accounts receivable Inventory Investment in Subsidiary Buildings (20-year remaining life) Equipment (5-year remaining life) Bonds payable (10-year remaining life) Any excess of price paid is goodwill. Immediately after closing the transaction, Parent and Subsidiary prepared the following post acquisition balance sheets from their separate financial records. Land Buildings (net) Equipment (net) Total Assets Book Value $50,000 40,000 150,000 40,000 100,000 Accounts payable Bonds payable Common stock, Parent Common stock, Subsidiary Paid-in Capital in Excess of Par, Parent Paid-in Capital in Excess of Par, Subsidiary Retained earnings, Parent Retained earnings, Subsidiary Total liabilities and equity REQUIRED: $ $ Fair Market Value $60,000 80,000 300,000 30,000 120,000 $ 80,000 $ 76,000 80,000 600,000 100,000 320,000 200,000 10,000 20,000 50,000 40,000 150,000 40,000 1,456,000 $ 310,000 (40,000) $ (200,000) (80,000) (680,000) (456,000) (60,000) $ (1,456,000) $ (310,000) (50,000) (100,000) (20,000) (80,000) (1) Prepare a fair value allocation. (2) Prepare consolidation entries in general journal form as of January 1, 2023, i.e., immediately after the acquisition. (3) Prepare an acquisition-date consolidated worksheet for Parent and Subsidiary.
On January 1, 2023, Parent Corporation exchanged $600,000 cash for 100 percent of the outstanding voting stock of Subsidiary Corporation. Parent plans to maintain Subsidiary as a wholly owned subsidiary with separate legal status and accounting information systems. At the date of acquisition, the book value of Subsidiary's net assets equaled fair market value except for the following: Inventory Land Cash Accounts receivable Inventory Investment in Subsidiary Buildings (20-year remaining life) Equipment (5-year remaining life) Bonds payable (10-year remaining life) Any excess of price paid is goodwill. Immediately after closing the transaction, Parent and Subsidiary prepared the following post acquisition balance sheets from their separate financial records. Land Buildings (net) Equipment (net) Total Assets Book Value $50,000 40,000 150,000 40,000 100,000 Accounts payable Bonds payable Common stock, Parent Common stock, Subsidiary Paid-in Capital in Excess of Par, Parent Paid-in Capital in Excess of Par, Subsidiary Retained earnings, Parent Retained earnings, Subsidiary Total liabilities and equity REQUIRED: $ $ Fair Market Value $60,000 80,000 300,000 30,000 120,000 $ 80,000 $ 76,000 80,000 600,000 100,000 320,000 200,000 10,000 20,000 50,000 40,000 150,000 40,000 1,456,000 $ 310,000 (40,000) $ (200,000) (80,000) (680,000) (456,000) (60,000) $ (1,456,000) $ (310,000) (50,000) (100,000) (20,000) (80,000) (1) Prepare a fair value allocation. (2) Prepare consolidation entries in general journal form as of January 1, 2023, i.e., immediately after the acquisition. (3) Prepare an acquisition-date consolidated worksheet for Parent and Subsidiary.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:On January 1, 2023, Parent Corporation exchanged $600,000 cash for 100 percent of the
outstanding voting stock of Subsidiary Corporation. Parent plans to maintain Subsidiary as a
wholly owned subsidiary with separate legal status and accounting information systems.
At the date of acquisition, the book value of Subsidiary's net assets equaled fair market value
except for the following:
Cash
Accounts receivable
Inventory
Investment in Subsidiary
Inventory
Land
Buildings (20-year remaining life)
Equipment (5-year remaining life)
Bonds payable (10-year remaining life)
Any excess of price paid is goodwill.
Immediately after closing the transaction, Parent and Subsidiary prepared the following post
acquisition balance sheets from their separate financial records.
Land
Buildings (net)
Equipment (net)
Total Assets
Book Value
$50,000
40,000
150,000
40,000
100,000
Accounts payable
Bonds payable
Common stock, Parent
Common stock, Subsidiary
Paid-in Capital in Excess of Par, Parent
Paid-in Capital in Excess of Par, Subsidiary
Retained earnings, Parent
Retained earnings, Subsidiary
Total liabilities and equity
REQUIRED:
$
$
Fair Market Value
$60,000
80,000
$
300,000
30,000
120,000
80,000 $
76,000
80,000
600,000
100,000
40,000
320,000
150,000
200,000
40,000
1,456,000 $ 310,000
(40,000) $
(200,000)
(80,000)
10,000
20,000
50,000
(680,000)
(50,000)
(100,000)
(20,000)
(80,000)
(456,000)
(60,000)
$ (1,456,000) $ (310,000)
(1) Prepare a fair value allocation.
(2) Prepare consolidation entries in general journal form as of January 1, 2023, i.e.,
immediately after the acquisition.
(3) Prepare an acquisition-date consolidated worksheet for Parent and Subsidiary.
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