Question
On January 5, 20X1, Alpha Inc. acquired 80% of the outstanding voting shares of Beta Inc. for $2,000,000 cash. Following are the separate balance sheets
On January 5, 20X1, Alpha Inc. acquired 80% of the outstanding voting shares of Beta Inc. for $2,000,000 cash. Following are the separate balance sheets for the two companies immediately after the stock purchase, as well as fair value information regarding Beta Inc.:
| Beta | ||||||||
| Alpha | Book Value | Fair Value | ||||||
| Assets | ||||||||
| Current assets | $ | 1,750,000 | $ | 500,000 | $ | 500,000 | ||
| Fixed assets, net | 5,000,000 | 1,625,000 | 2,000,000 | |||||
| Investment in Beta | 2,000,000 | - | - | |||||
| Total Assets | $ | 8,750,000 | $ | 2,125,000 | $ | 2,500,000 | ||
| Liabilities | ||||||||
| Current liabilities | $ | 250,000 | $ | 125,000 | $ | 125,000 | ||
| Stockholders' Equity | ||||||||
| Common stock | 7,000,000 | 1,500,000 | ||||||
| Capital in excess of par | 500,000 | - | ||||||
| Retained earnings | 1,000,000 | 500,000 | ||||||
| Total Stockholders' Equity | 8,500,000 | 2,000,000 | ||||||
| Total Liabilities and Stockholders Equity | $ | 8,750,000 | $ | 2,125,000 | ||||
Required:
Prepare the entries for adjustments and eliminations required to prepare the consolidated balance sheet immediately after acquisition under the acquisition method.
Prepare the consolidated balance sheet immediately after acquisition.
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Internal Quality Systems Auditing
Authors: Paul F. Lewis
1st Edition
1570744076, 978-1570744075
