Assume that the parent company acquires its subsidiary by exchanging 84,000 shares of its $2 par value Common Stock, with a fair value on the acquisition date of $41 per share, for all of the outstanding voting shares of the investee. In its analysis of the investee company, the parent values all of the subsidiarys assets and liabilities at an amount equaling their book values except for an unrecorded Trademark with a fair value of $240,000, an unrecorded Video Library valued at $600,000, and Patented Technology with a fair value of $125,000.

b. Given the following acquisition-date balance sheets of the parent and the subsidiary, prepare the consolidation entries.

Balance Sheet						Parent		Subsidiary
Assets
Cash						$514,020		$265,160
Accounts receivable						450,300		633,360
Inventory						650,000		813,540
Equity investment						3,444,000		-
Property, plant & equipment						10,600,000		1,805,140
						$15,658,320		$3,517,200
Liabilities and stockholders' equity
Accounts payable						$150,480		$177,800
Accrued liabilities						176,640		309,400
Long-term liabilities						3,840,000		910,000
Common stock						428,400		282,000
APIC						3,528,000		327,500
Retained earnings						7,534,800		1,510,500
						$15,658,320		$3,517,200

Consolidation Journal
	Description	Debit	Credit
[E]	Common stock	Answer	Answer
	APIC	Answer	Answer
	Equity investment, APIC, Cash, Retained earnings, or Goodwill	Answer	Answer
	Equity investment, APIC, Cash, Retained earnings, or Goodwill	Answer	Answer
[A]	Trademark	Answer	Answer
	Video library	Answer	Answer
	Patented technology	Answer	Answer
	Equity investment, APIC, Cash, Retained earnings, or Goodwill	Answer	Answer
	Equity investment, APIC, Cash, Retained earnings, Goodwill	Answer	Answer