LOOSE-LEAF Advanced Financial Accounting with Connect
11th Edition
ISBN: 9781259605192
Author: Theodore E. Christensen
Publisher: McGraw-Hill Education
expand_more
expand_more
format_list_bulleted
Question
Chapter 1, Problem 1.6E
a.
To determine
To prepare:
Introduction: Internal expansion refers to situation in a company forms a subsidiary by transferring some of its assets and liabilities and in exchange of ownership shares. Shares of the subsidiary is either provided to the shareholders in addition to their existing shares (Spin off) or in exchange of their existing shares (split off).
a.
Expert Solution
Explanation of Solution
In the books of parent company:
Record transfer of assets and liabilities:
| Date | Account | Debit ($) | Credit($) |
| Investment in Subsidiary M common stock | 498,000 | ||
| Provision for doubtful debts | 7,000 | ||
| 35,000 | |||
| Accumulated depreciation- Equipment | 60,000 | ||
| Cash | 40,000 | ||
| Accounts Receivable | 75,000 | ||
| Inventory | 50,000 | ||
| Land | 35,000 | ||
| Building | 160,000 | ||
| Equipment | 240,000 | ||
| (To record formation of subsidiary.) |
Table (1)
- Investment in Subsidiary M common stock is an asset and it is increased by $498,000. Therefore, Investment in Subsidiary M common stock account is debited with $498,000.
- Provision for doubtful debts is a contra asset and it is decreased by $7,000. Therefore, Provision for doubtful debts account is debited with $7,000.
- Accumulated depreciation-Building is a contra asset and it is decreased by $35,000. Therefore, Accumulated depreciation- Buildings account is debited with $35,000.
- Accumulated depreciation-Equipment is a contra asset and it is decreased by $60,000. Therefore, Accumulated depreciation- Equipment account is debited with $60,000.
- Cash is an asset and it is decreased by $40,000. Therefore, cash account is credited with $40,000.
- Accounts Receivable is an asset and it is decreased by $75,000. Therefore, Accounts Receivable account is credited with $75,000.
- Inventory is an asset and it is decreased by $50,000. Therefore, Inventory account is credited with $50,000.
- Land is an asset and it is decreased by $35,000. Therefore, Land account is credited with $35,000.
- Building is an asset and it is decreased by $160,000. Therefore, account is credited with $160,000.
- Equipment is an asset and it is decreased by $240,000. Therefore, account is credited with $240,000.
b.
To determine
To prepare: Journal entries that subsidiary company would record.
Introduction: Internal expansion refers to situation in a company forms a subsidiary by transferring some of its assets and liabilities and in exchange of ownership shares. Shares of the subsidiary is either provided to the shareholders in addition to their existing shares (Spin off) or in exchange of their existing shares (split off).
b.
Expert Solution
Explanation of Solution
In the books of subsidiary company:
Record transfer of assets and liabilities:
| Date | Account | Debit ($) | Credit($) |
| Cash | 40,000 | ||
| Accounts Receivable | 75,000 | ||
| Inventory | 50,000 | ||
| Land | 35,000 | ||
| Buildings | 160,000 | ||
| Equipment | 240,000 | ||
| Provision for doubtful debts | 7,000 | ||
| Accumulated | 35,000 | ||
| Accumulated depreciation- Equipment | 60,000 | ||
| Common Stock, $3 par | 120,000 | ||
| Additional paid in capital (balancing figure) | 378,000 | ||
| (To record receipt of assets and liabilities and issuance of stock.) |
Table (2)
- Cash is an asset and it is increased by $40,000. Therefore, cash account is debited with $40,000.
- Accounts Receivable is an asset and it is increased by $75,000. Therefore, Accounts Receivable account is debited with $75,000.
- Inventory is an asset and it is increased by $50,000. Therefore, Inventory account is debited with $50,000.
- Land is an asset and it is increased by $35,000. Therefore, Land account is debited with $35,000.
- Building is an asset and it is increased by $160,000. Therefore, Buildings account is debited with $160,000.
- Equipment is an asset and it is increased by $240,000. Therefore, Equipment account is debited with $240,000.
- Provision for doubtful debts is a contra asset and it is increased by $7,000. Therefore, Provision for doubtful debts account is credited with $7,000.
- Accumulated depreciation-Building is a contra asset and it is increased by $35,000. Therefore, Accumulated depreciation- Buildings account is credited with $35,000.
- Accumulated depreciation- Equipment is a contra asset and it is increased by $60,000. Therefore, Accumulated depreciation- Equipment account is credited with $60,000.
- Common Stock is equity and it is increased by $120,000. Therefore, Common Stock account is credited with $120,000.
- Additional paid in capital is equity and it is increased by $378,000. Therefore, Additional paid in capital account is credited with $378,000.
Want to see more full solutions like this?
Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!
Students have asked these similar questions
Delta's inventory records for February reflect the following details: On February 1, the beginning inventory consisted of 250 units priced at $3.20 each. On February 9, Delta made its first purchase of 350 units at a cost of $3.50 each. A second purchase was made on February 18, consisting of 500 units priced at $3.70 each. By the end of the month, on February 28, Delta sold 700 units at a price of $6.50 per unit. Using the FIFO (First-In, First-Out) cost flow method, what is the cost of goods sold (COGS) for February?
Please explain the solution to this general accounting problem with accurate principles.
Please explain how to solve this financial accounting question with valid financial principles.
Chapter 1 Solutions
LOOSE-LEAF Advanced Financial Accounting with Connect
Ch. 1 - What types of circumstances would encourage...Ch. 1 - How would the decision to dispose of a segment of...Ch. 1 - Prob. 1.3QCh. 1 - Prob. 1.4QCh. 1 - Prob. 1.5QCh. 1 - Prob. 1.6QCh. 1 - Prob. 1.8QCh. 1 - Prob. 1.9QCh. 1 - Prob. 1.10QCh. 1 - Prob. 1.11Q
Ch. 1 - Prob. 1.12QCh. 1 - Prob. 1.13QCh. 1 - Prob. 1.14QCh. 1 - Prob. 1.15QCh. 1 - Within the measurement period following a business...Ch. 1 - Prob. 1.17QCh. 1 - Prob. 1.1CCh. 1 - Prob. 1.3CCh. 1 - Prob. 1.4CCh. 1 - Risks Associated with Acquisitions Not all...Ch. 1 - Prob. 1.8CCh. 1 - Prob. 1.1.1ECh. 1 - Prob. 1.1.2ECh. 1 - Prob. 1.1.3ECh. 1 - Multiple-Choice Questions on Complex Organizations...Ch. 1 - Prob. 1.1.5ECh. 1 - Prob. 1.2.1ECh. 1 - Prob. 1.2.2ECh. 1 - Multiple-Choice Questions on Recording Business...Ch. 1 - Prob. 1.2.4ECh. 1 - Multiple-Choice Questions on Recording Business...Ch. 1 - Multiple-Choice Questions on Reported Balances...Ch. 1 - Multiple-Choice Questions on Reported Balances...Ch. 1 - Prob. 1.3.3ECh. 1 - Prob. 1.3.4ECh. 1 - Prob. 1.4.1ECh. 1 - Prob. 1.4.2ECh. 1 - Prob. 1.4.3ECh. 1 - Prob. 1.4.4ECh. 1 - Prob. 1.4.5ECh. 1 - Prob. 1.5ECh. 1 - Prob. 1.6ECh. 1 - Prob. 1.7ECh. 1 - Prob. 1.8ECh. 1 - Prob. 1.9ECh. 1 - Prob. 1.10ECh. 1 - Prob. 1.11ECh. 1 - Goodwill Recognition Spur Corporation reported the...Ch. 1 - Acquisition Using Debentures Planter Corporation...Ch. 1 - Bargain Purchase Using the data resented in E1-13,...Ch. 1 - Prob. 1.15ECh. 1 - Prob. 1.16ECh. 1 - Prob. 1.17ECh. 1 - Prob. 1.18ECh. 1 - Prob. 1.19ECh. 1 - Prob. 1.20ECh. 1 - Prob. 1.21ECh. 1 - Prob. 1.22ECh. 1 - Prob. 1.23ECh. 1 - Prob. 1.24PCh. 1 - Prob. 1.25PCh. 1 - Prob. 1.26PCh. 1 - Prob. 1.27PCh. 1 - Prob. 1.28PCh. 1 - Prob. 1.29PCh. 1 - Prob. 1.30PCh. 1 - Prob. 1.31PCh. 1 - Prob. 1.32PCh. 1 - Prob. 1.33PCh. 1 - Prob. 1.34PCh. 1 - Prob. 1.35PCh. 1 - Business Combination Following are the balance...Ch. 1 - Prob. 1.37PCh. 1 - Prob. 1.38PCh. 1 - Prob. 1.39PCh. 1 - Prob. 1.40P
Knowledge Booster
Similar questions
- Veloid Ltd. has Assets of $312,480 and Liabilities of $95,165. The firm has 11,920 shares of stock outstanding. Then the board decides to pay a dividend of $10.50 per share. What is the value of Stockholders' Equity after the payment of the dividend?arrow_forwardShri Manufacturing has estimated total factory overhead costs of $625,000 and 25,000 direct labor hours for the current fiscal year. If direct labor hours for the year total 23,500 and actual factory overhead totals $610,000, what is the amount of overapplied or underapplied overhead for the year? Helparrow_forwardWhat is the correct answer with accounting questionarrow_forward
- Please solve this general accounting problem an given step by step explanationarrow_forwardBeacon Manufacturing has $85,000 in assets. They also have $32,000 in liabilities and $8,500 in expenses, and they paid out $6,200 in dividends this year. The extended accounting equation is assets = liabilities + (revenue - (expenses + dividends)). What would their revenue need to be for their accounts to be in balance?arrow_forwardThe Patidar Group manufactures and sells a single product, Product T. Budgeted sales for June are $450,000. Gross Margin is budgeted at 35% of sales dollars. If the net income for June is budgeted at $62,500, the budgeted selling and administrative expenses are?arrow_forward
- Can you explain the correct methodology to solve this financial accounting problem?arrow_forwardCan you help me solve this general accounting question using the correct accounting procedures?arrow_forwardI need help with this general accounting question using standard accounting techniques.arrow_forward
- Can you help me solve this general accounting problem using the correct accounting process?arrow_forwardShri Manufacturing has estimated total factory overhead costs of $625,000 and 25,000 direct labor hours for the current fiscal year. If direct labor hours for the year total 23,500 and actual factory overhead totals $610,000, what is the amount of overapplied or underapplied overhead for the year?arrow_forwardSolve this General accounting problemarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
