Assume that Big Company decides to acquire 100% Little Company for $500,000. Prepare the appropriate journal entries.
Use the equity method being this is a controlled acquisition.
1. Perform the journal entries asked.
2. Complete the consolidated worksheet.
3. Prepare the consolidated balance sheet in good form.
Prepare the journal entries for a 100% Asset Acquisition (using Cash)
| Account |
DR |
CR |
| Cash |
$ 35,000 |
|
| AR |
$ 10,000 |
|
| Inventory |
$ 65,000 |
|
| Land |
$ 40,000 |
|
| PP&E |
$ 400,000 |
|
| Patent |
$ - |
|
| Goodwill |
$ 50,000 |
|
| AP |
|
$ 100,000 |
| Cash |
|
$ 500,000 |
Which accounting method is most appropriate for representing an investment of this type?Prepare the journal entries for a 100% Asset Acquisition (using Big Company Cash)
Prepare the journal entries for a 100% Acquisition by issuing 10,000 shares of Big Company Stock
| Account |
DR |
CR |
| Investment in Little Company |
$500,000 |
|
| Cash |
|
$500,000 |
Prepare Elimination Entries for Stock Acquisition