onsolidation at date of acquisition (purchase price equals book value) A parent company acquires its subsidiary by exchanging 35,000 shares of its Common Stock, with a market value on the acquisition date of $25 per share, for all of the outstanding voting shares of the investee.

a. What is the total fair value of the subsidiary on the acquisition date? $ Answer

b. Given the balance sheets of the parent and subsidiary in c. below, prepare the consolidation entry or entries on the date of acquisition.

c. Prepare the consolidated balance sheet on the date of acquisition.

Consolidation WorkSheet

Description

Debit

Credit

Answer

Common stock

Answer

Answer

APIC

Answer

Answer

Answer

Answer

Answer

Answer

Answer

Answer

to eliminate the stockholders' equity of the subsidiary on the acquisition date

Elimination Entries

Balance Sheet

Parent

Subsidiary

Dr

Cr

Consolidated

Assets

Cash

$405,000

$226,000

$Answer

Accounts receivable

1,280,000

348,000

Answer

Inventory

Equity Investment	875,000			Answer	Answer		Answer
Property, plant and equipment (PPE), net	9,332,000	702,000					Answer
	$13,832,000	$1,723,000					$Answer
Liabilities and stockholders' equity
Accounts payable	$627,000	$127,000					$Answer
Accrued liabilities	736,000	221,000					Answer
Long-term liabilities	3,000,000	500,000					Answer
Common stock	1,370,000	100,000		Answer	Answer		Answer
APIC	3,075,000	125,000		Answer	Answer		Answer
Retained earnings	5,024,000	650,000		Answer	Answer		Answer
	$13,832,000	$1,723,000		Answer	Answer		$Answer

1,940,000

447,000

Answer