| 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 acquiring 100% of the net assets of Little, accounting for it as a merger. |
|
|
| 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% of Little Company, accounting for it using the equity method |
| 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 |
gwcthe
acquisition2.xlsx
