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Assume that Big Company decides to acquire 100% Little Company for $500,000. Prepare the appropriate journal entries. Big Company Balance Sheet Assets, Liabilities & Equities

Assume that Big Company decides to acquire 100% Little Company for $500,000. Prepare the appropriate journal entries.

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Big Company Balance Sheet
Assets, Liabilities & Equities Book Value
Cash $2,100,000
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
Retained Earnings $1,450,000
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
Accumulated Depreciation -$150,000
Patent $0
Total Assets $400,000
AP $100,000
Common Stock $100,000
Additional Paid In Capital $50,000
Retained Earnings $150,000
Total Liabilities & Equity $400,000

Assume that Book Value = Fair Value

Prepare the journal entries for acquiring 100% of the net assets of Little, accounting for it as a merger.
Account DR CR
Which accounting method is most appropriate for representing an investment of this type?
Prepare the journal entries for a 100% of Little Company, accounting for it using the equity method
Account DR CR
Prepare the journal entries for a 100% Acquisition by issuing 10,000 shares of Big Company Stock
Account DR CR

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

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