The July 31, Year 3, balance sheets of two companies that are parties to a business combination are as follows: Red corp. Carrying Amount Carrying Amount Current assets 10 Property, plant, and equipment (net) 1, 720,080 852,060 $480, 600 1, 224, 080 $ 432,080 984,090 points Patents Gee'VB $2,944, 080 $1, 284,090 Slipped Current liabilities $1, 480,006 264,090 264,690 Long-term debt 492,080 396,800 Common shares 840, 600 180, 600 132,060 eBook Retained earnings 468,600 $2,944, 080 $1, 284,060 Print References In addition to the property, plant, and equipment identified above, Red Corp, attributed a value of $112,000 to Sax's assembled workforce. They have the knowledge and skill to operate Sax's manufacturing facility and are essential to the success of the operation. Although the eight manufacturing employees are not under any employment contracts, management of Red was willing to pay $112,000 as part of the purchase price on the belief that most or all of these employees would continue to work for the company Effective on August 1, Year 3, the shareholders of Sax accepted an offer from Red Corporation to purchase all of their common shares. Red's costs for investigating and drawing up the share purchase agreement amounted to $20,000. Required: (a) Assume that Red made a $944,000 cash payment to the shareholders of Sax for 100% of their shares. (i) Prepare the journal entry in the records of Red to record the share acquisition, (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.) View transaction list 3 Journal entry worksheet 3 (il) Prepare the consolidated balance sheet of Red Corp, as at August 1, Year 3. Red Corp. Consolidated Balance Sheet August 1. Year 3 10 Assets points Skipped eBook Print References Liabilities and Equity (b) Assume that Red issued 118,000 common shares, with market value of $8 per share to the shareholders of Sax for 100% of their 3 shares. Legal fees associated with issuing these shares amounted to $7,000 and were paid in cash. Red is identified as the acquirer. (i) Prepare the journal entries in the records of Red to record the share acquisition and related fees. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.) View transaction list 10 points Skipped Journal entry worksheet 3 (ii) Prepare the consolidated balance sheet of Red as at August 1. Year 3. Red Corp. Consolidated Balance Sheet 10 August 1, Year 3 points Assets Skipped eBook Print References Liabilities and Equity - 3 for its Investment in Sax. c) Assume the same facts as part (b) except that Red is a private company, uses ASPE, and chooses to use the cost method to account (i) Prepare the journal entries in the records of Red to record the share acquisition and related fees. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.) 10 View transaction list points Skipped Journal entry worksheet Book B Print Record the acquisition of shares from Sax for $944,000. References Note: Enter debits before credits. Transaction General Journal Debit Credit Grow 3 ii) Prepare the balance sheet of Red as at August 1, Year 3. Red Corp. Balance Sheet 10 August 1, Year 3 points Assets Skipped Book Print Liabilities and Equity References
