On January 5, 20X1, Alpha Inc. acquired 80% of the outstanding voting shares of Beta Inc. for $2,000,000 cash. Following are the separate balance sheets for the two companies immediately after the stock purchase, as well as fair value information regarding Beta Inc.: Beta Alpha Book Value Fair Value Assets Current assets $ 1,750,000 $ 500,000 $ 500,000 Fixed assets, net 5,000,000 1,625,000 2,000,000 Investment in Beta 2,000,000 - - Total Assets $ 8,750,000 $ 2,125,000 $ 2,500,000 Liabilities Current liabilities $ 250,000 $ 125,000 $ 125,000 Stockholders' Equity Common stock 7,000,000 1,500,000 Capital in excess of par 500,000 - Retained earnings 1,000,000 500,000 Total Stockholders' Equity 8,500,000 2,000,000 Total Liabilities and Stockholders’ Equity $ 8,750,000 $ 2,125,000 Required: Prepare the entries for adjustments and eliminations required to prepare the consolidated balance sheet immediately after acquisition under the acquisition method. Prepare the consolidated balance sheet immediately after acquisition. 1 Record the entry to eliminate Beta's stockholder equity accounts. 2 Record the entry to recognize the excess price paid above book value. 3 Record the entry to adjust net assets of Beta to their full fair value at time of acquisition. Required 1 Required 2 Prepare the consolidated balance sheet immediately after acquisition. ALPHA, INC. Consolidated Balance Sheet As of January 5, 20X1 Assets Current assets $2,250,000 Fixed assets, net 7,000,000 Investment in Beta Total Assets $9,250,000 Liabilities Current Liabilities $375,000 Stockholders' Equity Common stock 7,000,000 Capital in excess of par 500,000 Retained earnings 1,000,000 Total Stockholders' Equity 8,500,000 Total Liabilities and Equity $
On January 5, 20X1, Alpha Inc. acquired 80% of the outstanding voting shares of Beta Inc. for $2,000,000 cash. Following are the separate balance sheets for the two companies immediately after the stock purchase, as well as fair value information regarding Beta Inc.: Beta Alpha Book Value Fair Value Assets Current assets $ 1,750,000 $ 500,000 $ 500,000 Fixed assets, net 5,000,000 1,625,000 2,000,000 Investment in Beta 2,000,000 - - Total Assets $ 8,750,000 $ 2,125,000 $ 2,500,000 Liabilities Current liabilities $ 250,000 $ 125,000 $ 125,000 Stockholders' Equity Common stock 7,000,000 1,500,000 Capital in excess of par 500,000 - Retained earnings 1,000,000 500,000 Total Stockholders' Equity 8,500,000 2,000,000 Total Liabilities and Stockholders’ Equity $ 8,750,000 $ 2,125,000 Required: Prepare the entries for adjustments and eliminations required to prepare the consolidated balance sheet immediately after acquisition under the acquisition method. Prepare the consolidated balance sheet immediately after acquisition. 1 Record the entry to eliminate Beta's stockholder equity accounts. 2 Record the entry to recognize the excess price paid above book value. 3 Record the entry to adjust net assets of Beta to their full fair value at time of acquisition. Required 1 Required 2 Prepare the consolidated balance sheet immediately after acquisition. ALPHA, INC. Consolidated Balance Sheet As of January 5, 20X1 Assets Current assets $2,250,000 Fixed assets, net 7,000,000 Investment in Beta Total Assets $9,250,000 Liabilities Current Liabilities $375,000 Stockholders' Equity Common stock 7,000,000 Capital in excess of par 500,000 Retained earnings 1,000,000 Total Stockholders' Equity 8,500,000 Total Liabilities and Equity $
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
On January 5, 20X1, Alpha Inc. acquired 80% of the outstanding voting shares of Beta Inc. for $2,000,000 cash. Following are the separate balance sheets for the two companies immediately after the stock purchase, as well as fair value information regarding Beta Inc.:
| Beta | ||||||||
| Alpha | Book Value | Fair Value | ||||||
| Assets | ||||||||
| Current assets | $ | 1,750,000 | $ | 500,000 | $ | 500,000 | ||
| Fixed assets, net | 5,000,000 | 1,625,000 | 2,000,000 | |||||
| Investment in Beta | 2,000,000 | - | - | |||||
| Total Assets | $ | 8,750,000 | $ | 2,125,000 | $ | 2,500,000 | ||
| Liabilities | ||||||||
| Current liabilities | $ | 250,000 | $ | 125,000 | $ | 125,000 | ||
| Stockholders' Equity | ||||||||
| Common stock | 7,000,000 | 1,500,000 | ||||||
| Capital in excess of par | 500,000 | - | ||||||
| 1,000,000 | 500,000 | |||||||
| Total Stockholders' Equity | 8,500,000 | 2,000,000 | ||||||
| Total Liabilities and Stockholders’ Equity | $ | 8,750,000 | $ | 2,125,000 | ||||
Required:
- Prepare the entries for adjustments and eliminations required to prepare the consolidated
balance sheet immediately after acquisition under the acquisition method. - Prepare the consolidated balance sheet immediately after acquisition.
-
1Record the entry to eliminate Beta's
stockholder equity accounts. -
2Record the entry to recognize the excess price paid above book value.
-
3Record the entry to adjust net assets of Beta to their full fair value at time of acquisition.
- Required 1
- Required 2
Prepare the consolidated balance sheet immediately after acquisition.
|
|
|
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