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Consolidation entries at date of acquisition (purchase price greater than book value) A parent company acquires all of the outstanding common stock of its subsidiary

Consolidation entries at date of acquisition (purchase price greater than book value)

A parent company acquires all of the outstanding common stock of its subsidiary for cash purchase price of $397,500. On the acquisition date, the subsidiary reported $90,000 for Common Stock and $67,500 for Retained Earnings. An examination of the subsidiarys balance sheet revealed that book values were equal to fair values for all assets, except for an unrecorded patent, which the parent values at $142,500.

a. Prepare the entry that the parent makes to record the investment.

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General Journal Description Debit Credit 0 0 - 0 0 b. Prepare the [E] and [A] consolidation entries. Consolidation Journal Description Debit [E] common stock Credit 0 0 0 0 0 0 [A] Patent 0 0 0 0 0 0

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