Question
The following are preliminary financial statements for Green Co. and Gold Co. for the year ending December 31, 2018 prior to Greens acquisition of Gold.
The following are preliminary financial statements for Green Co. and Gold Co. for the year ending December 31, 2018 prior to Greens acquisition of Gold.
| Green Co. | Gold Co. |
Sales | $360,000 | $228,000 |
Expenses | (240,000) | (132,000) |
Net income | $120,000 | $ 96,000 |
|
|
|
Retained earnings, January 1, 2018 | $480,000 | $252,000 |
Net income (from above) | 120,000 | 96,000 |
Dividends declared | (36,000) | -0- |
Retained earnings, December 31, 2018 | $564,000 | $348,000 |
|
|
|
Current assets | $360,000 | $120,000 |
Land | 120,000 | 108,000 |
Building (net) | 480,000 | 336,000 |
Total assets | $960,000 | $564,000 |
|
|
|
Liabilities | $108,000 | $132,000 |
Common stock | 192,000 | 72,000 |
Additional paid-in capital | 96,000 | 12,000 |
Retained earnings, December 31, 2018 | 564,000 | 348,000 |
Total liabilities and stockholders equity | $960,000 | 564,000 |
On December 31, 2018 (subsequent to the preceding statements), Green exchanged 10,000 shares of its $10 par value common stock for all of the outstanding shares of Gold. Green's stock on that date has a fair value of $60 per share. Green was willing to issue 10,000 shares of stock because Gold's land was appraised at $204,000. Green also paid $14,000 to attorneys and accountants who assisted in creating this combination.
Required: Assuming that these two companies retained their separate legal identities, prepare journal entries to reflect the acquisition and consolidation for Green.
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