Question 1 (50 points). Piton Company was established on January 1, 2019. Along with other assets, it immediately purchased land for $60,000, and a building $75,000. On January 1, 2022, Piton transferred these assets, cash of $40,000, and inventory costing $50,000 to a newly created subsidiary, Sparrow Company, in exchange for 20,000 shares of Sparrow's $5 par value stock. Piton uses straight line depreciation and useful life of 25 years for the building, with no estimated residual values. Required: a. Give the journal entry that Piton recorded for the transfer of assets and liabilities to Sparrow (25 points). b. Give the journal entry that Sparrow recorded for the receipt of assets and liabilities from Piton (25 points). Question 2 (50 points). On January 1, 2022, Positive Corporation acquired Super Corporation's net assets by paying 205,000 cash. Balance sheet data for the Positive & Super and fair value information for Super immediately before the business combination are given below: Positive Book Value 125,000 35,000 174,500 35,500 280,000 -65,000 585,000 Assets Cash & receivables Inventory Land Patent Plant, Property and Equipment Less: Accumulated Depreciation Total Liabilities and Stockholders' Equity Accounts Payable Notes Payable Common Stock Additional Paid-in Capital Retained Earnings Total Super Book Value 27,500 46,000 92,000 0 135,000 -53,000 247,500 Fair Value 20,000 47,500 112,000 25,000 97,500 302,000 50,000 62,500 75,500 140,000 100,000 97,500 172,000 585,000 47,500 62,500 40,000 65,000 32,500 247,500 Required: a. Prepare the journal entry to record the acquisition of Super Corporation. (35 points). b. What would the balance of land be in the balanced sheet of combined company immediately after the combination? (5 points). c. What would the balance of accounts payable be in the balanced sheet of combined company immediately after the combination? (5 points). d. What would the balance of common stock be in the balanced sheet of combined company immediately after the combination? (5 points)
