On January 2, 20X8, Primary Corporation acquired 100 percent of Secondary Companys outstanding common stock. In exchange

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On January 2, 20X8, Primary Corporation acquired 100 percent of Secondary Company’s outstanding common stock. In exchange for Secondary’s stock, Primary issued bonds payable with a par and fair value of $650,000 directly to the selling stockholders of Secondary. The two companies continued to operate as separate entities subsequent to combination. Immediately prior to the combination, the book values and fair values of the companies’ assets and liabilities were as follows:


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At the date of combination, Secondary owed Primary $6,000 plus accrued interest of $500 on a short-term note. Both companies have properly recorded these amounts.



Required


a. Record the business combination on the books of Primary Corporation.


b. Present in general journal form all consolidation entries needed in a worksheet to prepare a consolidated balance sheet immediately following the business combination on January 2, 20X8.


c. Prepare and complete a consolidated balance sheet worksheet as of January 2, 20X8, immediately following the business combination.


d. Present a consolidated balance sheet for Primary and its subsidiary as of January 2, 20X8.

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Advanced Financial Accounting

ISBN: 9781260772135

13th Edition

Authors: Theodore Christensen, David Cottrell, Cassy Budd

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