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A parent company exchanges 10,000 shares of its $1 par value common stock, with a market value of $10/share, for all of the shares owned by the subsidiary's shareholders, resulting in a $100,000 total purchase price. On the acquisition date, the subsidiary reported a book value of Stockholders' Equity of $75,000, comprised of $30,000 of Common Stock and $45,000 of Retained Earnings. An examination of the subsidiary's balance sheet revealed that book values were equal to fair values for all assets except for PPE (net), which has a book value of $40,000 and a fair value of $65,000.

a. Prepare the entry that the parent makes to record the investment

b. Prepare the [E] and [A] consolidation entries.

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  • Category:- Accounting Basics
  • Reference No.:- M940391

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