Jefferson Company purchased all of the common shares of Louis Corporation on January 2. 20X3. for \(\$ 789.000\). At the date of combination, the balance sheet of Louis Corporation appeared as follows:

The fair values of all of Louis's assets and liabilities were equal to their book values except for Louis's fixed assets. Louis's land had a fair value of \(\$ 75.000\); the buildings. a fair value of \(\$ 300.000\) : and the equipment. a fair value of \(\$ 340.000\).
Jefferson Company decided to employ push-down accounting in accounting for the acquisition of Louis Corporation. Subsequent to the combination, Louis Corporation continued to operate as a separate company.

\section*{Required}

a. Record the purchase of Louis Corporation's stock on the books of Jefferson Company.

b. Present any entries that would be made on the books of Louis Corporation related to the business combination, assuming push-down accounting is used.

c. Present, in general journal form, all elimination entries that would appear in a consolidation workpaper for Jefferson Company and its subsidiary prepared immediately following the combination.

Transcribed Image Text:

Assets Cash and Receivables $ 34.000 Inventory 165.000 Land 60.000 Liabilities Current Payables Notes Payable Stockholders' Equity $ 25.000 100,000 Buildings (net) 250.000 Common Stock 200,000 Equipment (net) 320,000 Additional Capital 425.000 Retained Earnings 79.000 Total $829.000 Total $829.000