The following are the balance sheets for Plate and Salad immediately prior to Plate’s September 1, 20X1, acquisition of Salad:

Consider the following cases:

Case 1

Plate buys 100% of Salad’s common stock for $180,000 cash. The fair value of Salad’s assets and liabilities equals their book value.

Case 2

Plate buys 100% of Salad’s common stock for $210,000 cash. The fair value of Salad’s land is $20,000 and of its buildings and equipment is $110,000. All other fair values equal book values.

Required:

1. Prepare the September 1, 20X1, journal entry on Plate’s books to record the acquisition of Salad.

2. Prepare the elimination entries needed to prepare a consolidated balance sheet immediately after the acquisition.

3. Prepare the consolidated balance sheet immediately after the acquisition.

Transcribed Image Text:

Plate Salad Assets Cash $500,000 $100,000 20,000 Accounts receivable Inventory 50,000 100,000 30,000 Land 50,000 200,000 10,000 Bldg. & equip. net 100,000 Total assets $900,000 $260,000 Liabilities & equity Accounts payable Bonds payable Common stock & APIC $ 40,000 $ 80,000 200,000 300,000 360,000 -0- 100,000 80,000 Retained earnings