| Assume that Big Company decides to acquire 100% Little Company for $500,000. Prepare the appropriate journal entries. |
| Big Company Balance Sheet | | | Prepare the journal entries for a 100% Asset Acquisition (using Cash) | | | | Prepare Elimination Entries for Stock Acquisition |
| Assets, Liabilities & Equities | Book Value | | | | | | Account | DR | CR |
| Cash | $2,100,000 | | Account | DR | CR |
| AR | $10,000 |
| Inventory | $200,000 |
| Land | $40,000 |
| PP&E | $400,000 |
| Accumulated Depreciation | -$150,000 |
| Patent | $0 |
| Total Assets | $2,600,000 |
| AP | $100,000 |
| Common Stock ($10 par) | $450,000 |
| Additional Paid In Capital | $600,000 | | Which accounting method is most appropriate for representing an investment of this type? | | | | Big Company Balance Sheet (Consolidated) |
| Retained Earnings | $1,450,000 | | | | | | Assets, Liabilities & Equities | | Book Value |
| Total Liabilities & Equity | $2,600,000 |
| Little Company Balance Sheet |
| Assets, Liabilities & Equities | Book Value |
| Cash | $35,000 |
| AR | $10,000 |
| Inventory | $65,000 |
| Land | $40,000 |
| PP&E | $400,000 | | Prepare the journal entries for a 100% Asset Acquisition (using Big Company Cash) |
| Accumulated Depreciation | -$150,000 |
| Patent | $0 | | Account | DR | CR |
| Total Assets | $400,000 |
| AP | $100,000 |
| Common Stock | $100,000 | | Prepare the journal entries for a 100% Acquisition by issuing 10,000 shares of Big Company Stock |
| Additional Paid In Capital | $50,000 |
| Retained Earnings | $150,000 | | Account | DR | CR |
| Total Liabilities & Equity | $400,000 |
| Assume that Book Value = Fair Value |
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act470_studenttemplate_ct_mod02_opt1.xlsx
