Using the data in the Option 1 Spreadsheet (linked at the bottom of the page), perform the accounting required for the acquisition of Little, Inc. by Big, Inc. This is a 100% acquisition where the book value of the assets acquired equals the acquisition price. Within the worksheet, you are to:

Select an accounting method (either cost or equity) and explain why you selected this method

Perform the required journal entries

Complete the consolidation worksheet

Prepare the consolidated balance sheet in good form

Assume that Big Company decides to acquire 100% Little Company for $500,000. Prepare the appropriate journal entries.
Big Company Balance Sheet			Prepare the journal entries for acquiring 100% of the net assets of Little, accounting for it as a merger.				Prepare Elimination Entries for Stock Acquisition
Assets, Liabilities & Equities	Book Value						Account	DR	CR
Cash	$2,100,000		Account	DR	CR
AR	$10,000
Inventory	$200,000
Land	$40,000
PP&E	$400,000
Accumulated Depreciation	-$150,000
Patent	$0
Total Assets	$2,600,000
AP	$100,000
Common Stock ($10 par)	$450,000
Additional Paid In Capital	$600,000		Which accounting method is most appropriate for representing an investment of this type?				Big Company Balance Sheet (Consolidated)
Retained Earnings	$1,450,000						Assets, Liabilities & Equities		Book Value
Total Liabilities & Equity	$2,600,000
Little Company Balance Sheet
Assets, Liabilities & Equities	Book Value
Cash	$35,000
AR	$10,000
Inventory	$65,000
Land	$40,000
PP&E	$400,000		Prepare the journal entries for a 100% of Little Company, accounting for it using the equity method
Accumulated Depreciation	-$150,000
Patent	$0		Account	DR	CR
Total Assets	$400,000
AP	$100,000
Common Stock	$100,000		Prepare the journal entries for a 100% Acquisition by issuing 10,000 shares of Big Company Stock
Additional Paid In Capital	$50,000
Retained Earnings	$150,000		Account	DR	CR
Total Liabilities & Equity	$400,000
Assume that Book Value = Fair Value