Consolidation at date of acquisition (purchase price greater than book value, acquisition journal entries 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 $45 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.

a. Prepare the journal entry that the parent makes to record the acquisition. General Journal Description Debit Credit Common stock b. Given the following acquisition-date balance sheets of the parent and the subsidiary, prepare the consolidation entries. Parent Subsidiary Balance Sheet Assets Cash Accounts receivable Inventory Equity investment Property, plant & equipment $514,020 $265,160 450,300 633,360 650,000 813,540 3,780,000 10,600,000 2,255,140 $15,994,320 $3,967,200 Liabilities and stockholders' equity Accounts payable Accrued liabilities Long-term liabilities Common stock APIC $150,480 $177,800 176,640 309,400 3,840,000 910,000 428,400 432,000 3,864,000 477,500 7,534,800 1,660,500 $15,994,320 $3,967,200 Retained earnings Credit Consolidation Journal Description Debit [E] Common stock APIC [A] Trademark Video library Patented technology c. Prepare the consolidation spreadsheet. Consolidation Worksheet Subsidiary Debit Parent Credit Consolidated Assets Cash Accounts receivable Inventory Equity investment $514,020 450,300 650,000 3,780,000 $265,160 633,360 813,540 [E] $ 10,600,000 2,255,140 [A] PPE, net Trademark Video library Patented technology Goodwill [A] [A] - [A] $15,994,320 $3,967,200 Liabilities and equity Accounts payable Accrued liabilities Long-term liabilities Common stock APIC Retained earnings $150,480 $177,800 $176,640 $309,400 $3,840,000 $910,000 $428,400 $432,000 [E] $ $3,864,000 $477,500 [E] $7,534,800 $1,660,500 [E] $ $15,994,320 $3,967,200 4 4