Accounting

Online Weekly Assessment -1 (15%) Individual

Semester : Summer 2021 Year : 2020-2021

Course Title : Advanced Financial Accounting

Course Code : ACT 460 Version : A

Instructor : Dr. Ali COSKUN

Deadline : August 6, 2021 at 23:59

To be completed by the students

Students Name : Student ID:

Section :

Major :

Grading Scheme

Question Earned Points Max. Points Question Earned Points Max. Points

1 50

2 50

Total Earned Points Total Available Points Instructor Signature

100

Instructions for answering the questions:

The answer to this question is required as handwritten.

Please follow the below steps:

1. Write on a blank paper your AUM student ID, full name, course code, section and date

2. Write your answers to the below questions.

3. Take a picture or scan, and upload as one-file and in PDF format.

Course Title: Advanced Financial Accounting Course Code: ACT460 Online Fall 2020 2 | P a g e

QUESTIONS

Question 1 (50 points). Planet Company was established on January 1, 2018. Along with other assets, it

immediately purchased land for $200,000, and a building $150,000. On January 1, 2021, Planet transferred

these assets, cash of $30,000, and inventory costing $75,000 to a newly created subsidiary, Saturn

Company, in exchange for 120,000 shares of Saturn’s $2 par value stock. Planet uses straight line

depreciation and useful life of 20 years for the building, with no estimated residual values.

Required:

a. Give the journal entry that Planet recorded for the transfer of assets and liabilities to Saturn (25 points).

b. Give the journal entry that Saturn recorded for the receipt of assets and liabilities from Planet (25 points).

Question 2 (50 points). On January 1, 2021, Pluto Corporation acquired Sun Corporation's net assets

by paying $190,000 cash. Balance sheet data for the Pluto & Sun and fair value information for Sun

immediately before the business combination are given below:

Pluto Sun

ASSETS Book Value Book Value Fair Value

Cash $105,000 $60,000 $60,000

Notes receivable 225,000 60,500 60,500

Inventory 190,000 52,500 60,000

Plant, Property and Equipment 375,000 175,000 150,000

Less: Accumulated Depreciation -140,000 -45,000

Total Assets $755,000 $303,000 $330,500

LIABILITIES & STOCKHOLDERS’ EQUITY Accounts Payable $155,000 $52,000 $52,000

Notes Payable 235,000 85,000 85,000

Bonds payable 100,000 25,000 25,000

Common Stock 30,000 40,000

Additional Paid-in Capital 100,000 35,000

Retained Earnings 135,000 66,000

Total Liabilities and Equities $755,000 $303,000

Required: a. Prepare the journal entry to record the acquisition of Sun Corporation (35 points).

b. What would the balance of inventory be in the balanced sheet of combined company immediately after

the combination? (5 points).

c. What would the balance of accounts payable be in the balanced sheet of combined company immediately

after the combination? (5 points).

d. What would the balance of common stock be in the balanced sheet of combined company immediately

after the combination? (5 points).