Concept explainers
a.
Concept Introduction:
Consolidation: Consolidation is the process of accounting where books of the parent company are reported along with the books of the subsidiary company in consolidated/combined form after making necessary
To Explain:
a.
Explanation of Solution
Following journal entry would be recorded:
In the books of P Corporation | ||||
Journal Entry Register | ||||
Particulars | Debit | Credit | ||
(1) | Merger Expense | 178000 | ||
To cash | 178000 | |||
Being legal fees paid recorded | ||||
(2) | Cash | 20000 | ||
Accounts Receivable | | |||
Inventory | | |||
Patents | | |||
Building & Equipment | | |||
| ||||
To Accounts Payable | | |||
To Notes Payable | | |||
Being purchase of S corporation recoded |
b.
Concept Introduction:
Consolidation: Consolidation is the process of accounting where books of the parent company are reported along with the books of the subsidiary company in consolidated/combined form after making necessary adjustment entries as required in the process of consolidation.
To Prepare: a balance sheet for P immediately after acquisition.
b.
Explanation of Solution
Combined Balance Sheet | ||||
February 1, 20X3 | ||||
Liabilities | Amount | Assets | Amount | |
Accounts Payable | | Cash | | |
Notes Payable | | Accounts Receivable | | |
Common Stock | | Inventory | | |
Additional Paid in Capital | | Patents | | |
Retained Earnings | | Buildings and Equipment | | |
Less: Accumulated Dep. | | |||
Goodwill | | |||
Total | | Total | |
c.
Concept Introduction:
Consolidation: Consolidation is the process of accounting where books of the parent company are reported along with the books of the subsidiary company in consolidated/combined form after making necessary adjustment entries as required in the process of consolidation.
To Explain: journal entry to be recorded by P if it acquired all of S’s common Stock (instead of S’s net assets) for
c.
Explanation of Solution
Journal entry to be recorded:
In the books of P Corporation | ||||
Journal Entry Register | ||||
Particulars | Debit | Credit | ||
Investment in Zink Co. | | |||
To Cash | | |||
Being legal fees paid recorded |
Note 1: Computation of Goodwill
Fair Value of consideration given:
Fair Value of net assets acquired:
Therefore, value of goodwill is
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