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Sloane Inc. (subsidiary Example 1: Wholly Owned Subsidiary Patel Co. (parent): Debit Credit Cash 400.000 Cash Accounts receivable 300.000 Accounts Payable 150,000 Common stock 300.000 Add. paid-in capital Retained earnings Accumulated OCI Total 700.000 Fair value 95.000 40,000 00.000 0 225.000 40.000 120.000 80.000 50.000 700.000 Book value 95.000 50.000 70,000 45.000 260.000 40,000 90.000 95.000 25.000 10.000 260.000 Machine Building Goodwill Total Accounts payable Common stock Add. paid.in capital Retained earnings Accumulated OCI Total Previously intangible assets not reported on Sloane's Balance sheet: Brand names S 50.000 Favorable lease agreements Assembled workforce $2,000 Potential future contracts Developed technology 15.000 60.000 80.000 Patel issued 25.000 shares of its S1 par value common stock at a market price of $17 per share to acquire all the Sloane's outstanding common stock. Patel paid $12.000 of legal fees to lawyers for this business combination, $4,000 finder's fee and $2,000 for issuing securities. Sloane is to continue its corporate existence as a wholly owned subsidiary of Patel Company Patel's journal entries: AC 1425,000 Finder fee suing 200 2 1 Record Acquisition Cost in the Investment Account 25,000x$17- $425,000 Fair value of identifiable net assets of Sloane =(225,000+50,000+15,000+80,000 ) - 40.000 330,000 or Book value of equityet assets (90,000+ 95,000+25,000+10,000)+ - 10,000+20,000 45,000+50,000+15,000+80,000) = 330,000 Goodwill - Acquisition Cost-Fair value of net identifiable Assets= (25,000 $17) - $330,000 - 95,000 (E) Common Stock 90,000 Add paid to Capital 45,000 25,000 Accumulated 10,0000 -ovestment in Sorong (E) eliminates subsidiary's stockholders' equity against parent's investment in subsidiary's book value Retained earnings CT net assets. 205,000-Patel's investment in Fair value differentials ($110,000) Goodwill 595,000 (R) revalues subsidiary's identifiable assets and liabilities to their fair market value at the date of investment acquisition, recognizes the amount of goodwill and eliminates the remaining balance of this parent's It should be noted that working paper entries will never be entered in either the parent's or the consolidated financial statements subsidiary's accounting records they are only used in the working paper for the preparation of the Working paper for consolidated balance sheet on date of business combination Working paper entries Patel Sloane Adjustments & Eliminations Consolidated (book value) (book value) Debits Credits Cash 382,000 95,000 Accounts receivable 300,000 Investment in Sloane 425,000 Machine 50.000 Building 70,000 Brand names Favorable lease agreements Developed technology Goodwill 45.000 Total 1.107.000 260.000 Accounts payable 150,000 40,000 Common stock 325,000 90,000 Add. paid-in capital $18,000 95,000 Retained earnings 64,000 25,000 Accumulated OCI 50,000 10,000 Total 1.107.000 260,000 Cash (Patel)= 400,000-18,000 Retained earnings (Patel) - 80,000 -16,000 64,000 Sloane Inc. (subsidiary Example 1: Wholly Owned Subsidiary Patel Co. (parent): Debit Credit Cash 400.000 Cash Accounts receivable 300.000 Accounts Payable 150,000 Common stock 300.000 Add. paid-in capital Retained earnings Accumulated OCI Total 700.000 Fair value 95.000 40,000 00.000 0 225.000 40.000 120.000 80.000 50.000 700.000 Book value 95.000 50.000 70,000 45.000 260.000 40,000 90.000 95.000 25.000 10.000 260.000 Machine Building Goodwill Total Accounts payable Common stock Add. paid.in capital Retained earnings Accumulated OCI Total Previously intangible assets not reported on Sloane's Balance sheet: Brand names S 50.000 Favorable lease agreements Assembled workforce $2,000 Potential future contracts Developed technology 15.000 60.000 80.000 Patel issued 25.000 shares of its S1 par value common stock at a market price of $17 per share to acquire all the Sloane's outstanding common stock. Patel paid $12.000 of legal fees to lawyers for this business combination, $4,000 finder's fee and $2,000 for issuing securities. Sloane is to continue its corporate existence as a wholly owned subsidiary of Patel Company Patel's journal entries: AC 1425,000 Finder fee suing 200 2 1 Record Acquisition Cost in the Investment Account 25,000x$17- $425,000 Fair value of identifiable net assets of Sloane =(225,000+50,000+15,000+80,000 ) - 40.000 330,000 or Book value of equityet assets (90,000+ 95,000+25,000+10,000)+ - 10,000+20,000 45,000+50,000+15,000+80,000) = 330,000 Goodwill - Acquisition Cost-Fair value of net identifiable Assets= (25,000 $17) - $330,000 - 95,000 (E) Common Stock 90,000 Add paid to Capital 45,000 25,000 Accumulated 10,0000 -ovestment in Sorong (E) eliminates subsidiary's stockholders' equity against parent's investment in subsidiary's book value Retained earnings CT net assets. 205,000-Patel's investment in Fair value differentials ($110,000) Goodwill 595,000 (R) revalues subsidiary's identifiable assets and liabilities to their fair market value at the date of investment acquisition, recognizes the amount of goodwill and eliminates the remaining balance of this parent's It should be noted that working paper entries will never be entered in either the parent's or the consolidated financial statements subsidiary's accounting records they are only used in the working paper for the preparation of the Working paper for consolidated balance sheet on date of business combination Working paper entries Patel Sloane Adjustments & Eliminations Consolidated (book value) (book value) Debits Credits Cash 382,000 95,000 Accounts receivable 300,000 Investment in Sloane 425,000 Machine 50.000 Building 70,000 Brand names Favorable lease agreements Developed technology Goodwill 45.000 Total 1.107.000 260.000 Accounts payable 150,000 40,000 Common stock 325,000 90,000 Add. paid-in capital $18,000 95,000 Retained earnings 64,000 25,000 Accumulated OCI 50,000 10,000 Total 1.107.000 260,000 Cash (Patel)= 400,000-18,000 Retained earnings (Patel) - 80,000 -16,000 64,000