Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

hi can you explain to me how to solve it, thank you Part three: work out 1. Assume that company A issues 10,000 shares ($

image text in transcribed

hi can you explain to me how to solve it, thank you

Part three: work out 1. Assume that company A issues 10,000 shares ($ 20 par value common stock and currently selling at $ 100 per share) and pays $ 750,000 for all of company B assets and liabilities and company B dissolved as a legal entity Additional information To process the business combination company A pays the following amounts. Secretarial and administrative costs of $ 7,500 $10,000 to SEC for getting registered the new common stock issued by company A 5000 accounting and attorney fees. The following balance sheet was prepared during the date of business combination (assume values are giving in US S). Accounts Company A stock value Dec 31, 2018 Fair Value Dec 31,2018 Current assets PPE Long term debts Net assets Common stock ETB 30 per share Common stock ETB 50 3,000,000 5,000,000 1,500,000 3.500,000 Company B Book Value Dec 31,2018 400,000 800,000 200,000 1,000,000 750,000 1,000,000 250,000 1,500,000 4,000,000 500,000 per share 500,000 100,000 Additional paid in capital Retained earnings Owners' equity 1,000,000 5,500,000 400,000 1,000,000 Required: based on the above information answer the following question (10 marks) a. Prepare the necessary journal entries. b. Prepare consolidated balance sheet on the data of business combination and the consolidation working paper journal entries. 2. DC company acquires all of the outstanding common stock of NW company for 2,000,000 cash. The balance sheet of NW company is given below. Fair values 1/1/2019 400,000 800,000 1,500,000 Book value 1/1/2019 Current assets 400,000 Patented technology (20 years) 500,000 PPE (property plant and 1,200,000 equipment) (10 years) Bonds 300,000 Net book value 1,800,000 Common stock Additional paid in capital Retained earnings 300,000 2,400,000 Assume NW company earns $ 500,000 income in 2019 and pays $200,000 cash divided July 31/2019, Required: (9 marks) a. Allocate the amount consideration to the appropriate accounts on the date of business combination b. Compute the amortization amount c. Record the necessary journal entries (think 5 journal entries) d. It is known that for the first year, the parent prepares five entries on the work paper consolidate the two companies. Record the journal entries under equity method accounting. Part three: work out 1. Assume that company A issues 10,000 shares ($ 20 par value common stock and currently selling at $ 100 per share) and pays $ 750,000 for all of company B assets and liabilities and company B dissolved as a legal entity Additional information To process the business combination company A pays the following amounts. Secretarial and administrative costs of $ 7,500 $10,000 to SEC for getting registered the new common stock issued by company A 5000 accounting and attorney fees. The following balance sheet was prepared during the date of business combination (assume values are giving in US S). Accounts Company A stock value Dec 31, 2018 Fair Value Dec 31,2018 Current assets PPE Long term debts Net assets Common stock ETB 30 per share Common stock ETB 50 3,000,000 5,000,000 1,500,000 3.500,000 Company B Book Value Dec 31,2018 400,000 800,000 200,000 1,000,000 750,000 1,000,000 250,000 1,500,000 4,000,000 500,000 per share 500,000 100,000 Additional paid in capital Retained earnings Owners' equity 1,000,000 5,500,000 400,000 1,000,000 Required: based on the above information answer the following question (10 marks) a. Prepare the necessary journal entries. b. Prepare consolidated balance sheet on the data of business combination and the consolidation working paper journal entries. 2. DC company acquires all of the outstanding common stock of NW company for 2,000,000 cash. The balance sheet of NW company is given below. Fair values 1/1/2019 400,000 800,000 1,500,000 Book value 1/1/2019 Current assets 400,000 Patented technology (20 years) 500,000 PPE (property plant and 1,200,000 equipment) (10 years) Bonds 300,000 Net book value 1,800,000 Common stock Additional paid in capital Retained earnings 300,000 2,400,000 Assume NW company earns $ 500,000 income in 2019 and pays $200,000 cash divided July 31/2019, Required: (9 marks) a. Allocate the amount consideration to the appropriate accounts on the date of business combination b. Compute the amortization amount c. Record the necessary journal entries (think 5 journal entries) d. It is known that for the first year, the parent prepares five entries on the work paper consolidate the two companies. Record the journal entries under equity method accounting

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Principles Of Auditing And Other Assurance Services

Authors: Ray Whittington, Kurt Pany

22nd Edition

126059808X, 978-1260598087

More Books

Students also viewed these Accounting questions