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( b ) Assume that Red issued 1 2 1 , 0 0 0 common shares, with a market value of $ 8 per share

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(b) Assume that Red issued 121,000 common shares, with a market value of $8 per share to the shareholders of Sax for 100% of their
shares. Legal fees associated with issuing these shares amounted to $6,000 and were paid in cash. Red is identified as the acquirer.
(i) Prepare the journal entries in the records of Red to record the share acquisition and related fees. (If no entry is required for a
transaction/event, select "No Journal Entry Required" in the first account field.)The July 31, Year 3, balance sheets of two companies that are parties to a business combination are as follows:
In addition to the property, plant, and equipment identified above, Red Corp. attributed a value of $108,000 to Sax's assembled
workforce. They have the knowledge and skill to operate Sax's manufacturing facility and are essential to the success of the operation.
Although the eight manufacturing employees are not under any employment contracts, management of Red was willing to pay
$108,000 as part of the purchase price on the belief that most or all of these employees would continue to work for the company.
Effective on August 1, Year 3, the shareholders of Sax accepted an offer from Red Corporation to purchase all of their common shares.
Red's costs for investigating and drawing up the share purchase agreement amounted to $21,000. A Record the acquisition of shares from Sax for $968,000.
B Record the $21,000 cash paid for professional fees
expense and $6,000 paid for legal fees for issue of
shares. (ii) Prepare Red's consolidated balance sheet as at August 1, Year 3.
\table[[Red Corp.],[Consolidated Balance Sheet,],[August 1, Year 3,],[,],[Assets,],[,],[,],[,],[,],[,],[,],[,],[,],[,],[,],[,],[,],[,]]
(c) Assume the same facts as part (b) except that Red is a private company, uses ASPE, and chooses to use the cost method to account for its investment in Sax.
(i) Prepare the journal entries in the records of Red to record the share acquisition and related fees. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)A Record the acquisition of shares from Sax for $968,000.
B Record the $21,000 cash paid for professional fees
expense and $6,000 paid for legal fees for issue of
shares.
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