Question
On 1-1 2019, Dubai Inc. purchased 95 percent of Sub. Inc. for 120,000 cash. The Balance Sheet of each corporation just prior to the acquisition
On 1-1 2019, Dubai Inc. purchased 95 percent of Sub. Inc. for 120,000 cash. The Balance Sheet of each corporation just prior to the acquisition presented below. Additionally, book value and fair value for all of Subs assets and liabilities are equal, with the exception of Property, Plant and Equipment, whose fair value is 47,000.
Balance sheet before acquisition
Balance Sheet
|
| Dubai Inc. | SUB Inc. |
| Assets | 1/1/2019 | 1/1/2019 |
| Current Assets |
|
|
| Cash | $170,000 | $21,000 |
| Accounts receivable (Net) | 60,000 | 45,000 |
| Inventory | 50,000 | 45,000 |
| Total Current Assets | $280,000 | $111,000 |
|
Fixed Assets |
|
|
| Property, Plant, and Equipment (Net of Accumulated Depreciation) | 265,000 | 42,000 |
| Goodwill |
|
|
| Total Assets | 545,000 | 153,000 |
|
|
| |
Liabilities |
|
| |
Current Liabilities |
|
| |
Accounts Payable | $70,000 | $30,000 | |
Accruals Payable | 20,000 | 15,000 | |
Total Current Liabilities | $90,000 | $45,000 | |
Non-Current Liabilities |
|
| |
Bonds Payable | $180,000 |
| |
Total liabilities | $270,000 | $45,000 | |
Shareholders' Equity | ||
Non-Controlling Interest (Share of Subsidiary) | $ | $ |
Common Stock ($5 Par) | 100,000 | 55,000 |
Paid In Capital | 20,000 | 8,000 |
Retained Earnings | 155,000 | 45,000 |
Total Shareholders' Equity | $275,000 | $108,000 |
Total Liabilities and Shareholder's Equity | $545,000 | $153,000 |
Prepare the necessary work paper adjusting entries on the date of purchase.
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