Consolidation at date of acquisition (purchase price equals book value) A parent company acquires its subsidiary by exchanging 45,000 shares of its Common Stock, with a market value on the acquisition date of $25 per share, for all of the outstanding voting shares of the investee.

a. What is the total fair value of the subsidiary on the acquisition date?

$Answer

b. Given the balance sheets of the parent and subsidiary in c. below, prepare the consolidation entry or entries on the date of acquisition.

Consolidation WorkSheet
	Description	Debit	Credit
Answer[C][E][A][D][I]	Common stock	Answer	Answer
	APIC	Answer	Answer
	AnswerEquity investmentCommon stockAPICRetained earnings	Answer	Answer
	AnswerEquity investmentCommon stockAPICRetained earnings	Answer	Answer

c. Prepare the consolidated balance sheet on the date of acquisition.

				Elimination Entries
Balance Sheet	Parent	Subsidiary		Dr	Cr		Consolidated
Assets
Cash	$405,000	$226,000					$Answer
Accounts receivable	1,280,000	348,000					Answer
Inventory	1,940,000	447,000					Answer
Equity investment	1,125,000			Answer	Answer		Answer
Property, plant and equipment (PPE), net	9,332,000	952,000					Answer
	$14,082,000	$1,973,000					$Answer
Liabilities and stockholders' equity
Accounts payable	$627,000	$127,000					$Answer
Accrued liabilities	736,000	221,000					Answer
Long-term liabilities	3,000,000	500,000					Answer
Common stock	1,370,000	100,000		Answer	Answer		Answer
APIC	3,325,000	125,000		Answer	Answer		Answer
Retained earnings	5,024,000	900,000		Answer	Answer		Answer
	$14,082,000	$1,973,000		Answer	Answer		$Answer