Investment in festus using the acquisition method


On January 1, 2010, Chester Inc. acquires 100% of Festus Corp.'s outstanding common stock by exchanging 37,500 shares of Chester's $2 par value common voting stock. On January 1, 2010, Chester's voting common stock had a market value of $40.00 per share. Festus' voting common shares were selling for $6.50 per share. Festus' balances on the acquisition date, just prior to acquisition, are listed below. Chester is accounting for the investment in Festus using the acquisition method.

Required:

A. Prepare a table showing the computation of the value of the Goodwill account on the date of acquisition, 1/1/10.

B. Prepare Chester, Inc.'s journal entry (or entries) to record its acquisition of Festus Corp. assuming that the separate incorporation of Festus is maintained.

C. Prepare Chester, Inc. journal entry (or entries) to record its acquisition of Festus Corp. assuming that Festus Corp. is immediately dissolved.

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Accounting Basics: Investment in festus using the acquisition method
Reference No:- TGS065404

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