Question
Supernova Company had the following summarized balance sheet on December 31, 20X1: Assets Accounts Receivable 200,000 Inventory 450,000 Property and plant (net) 600,000 Goodwill 150,000
Supernova Company had the following summarized balance sheet on December 31, 20X1:
Assets
Accounts Receivable 200,000
Inventory 450,000
Property and plant (net) 600,000
Goodwill 150,000
Total 1,400,000
Liabilities and Equity
Notes Payable 600,000
Common stock, $5 par 300,000
Paid In Capital, Excess of par 400,000
Retained Earnings 100,000
Total 1,400,000
The fair value of the inventory and property and plant is 600,000 and 850,000 respectively
Assume that Redstar Corporation exchanges 45,000 of its $3 par value shares of common stock, when the fair price is $4/share, for 100% of the common stock of Supernova Company. Redstar incurred direct acquisition costs of 5,000 and stock issuance costs of 5,000
Required:
A. What journal entry will Redstar Corporation record for the investment in Supernova
B. Prepare supporting determination and distribution of excess schedule
C. Prepare Redstar's elimination and adjustment entry for the acquisition of Supernova
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