Problem Solving – Journal
Option 1
| Part I | Part II | |||||||||||||
| Prepare your written response in the areas below. Use a separate section to address a separate part of the question. | Assume that Big Company decides to acquire 100% of Little Company for $200,000. Prepare the consolidated balance sheet and any supporting worksheets. | Calculation of fair value of the net assets of Little Company | Journal Entry for Acquisition | Assume that Big Company decides to acquire 100% of Little Company for $200,000. Prepare the consolidated balance sheet and any supporting worksheets. | Prepare the Consolidated Balance Sheet in the area below | |||||||||
| 1 | Big Company Balance Sheet | Big Company Worksheet | Big Company Balance Sheet | |||||||||||
| Assets, Liabilities & Equities | Book Value | Assets, Liabilities & Equities | Assets, Liabilities & Equities | |||||||||||
| Cash | $500,000 | Cash | Cash | |||||||||||
| AR | $10,000 | AR | AR | |||||||||||
| Inventory | $50,000 | Inventory | Inventory | |||||||||||
| Land | $40,000 | Land | Land | |||||||||||
| PP&E | $400,000 | PP&E | PP&E | |||||||||||
| Accumulated Depreciation | -$150,000 | Accumulated Depreciation | Accumulated Depreciation | |||||||||||
| Goodwill | ||||||||||||||
| Patent | $0 | Patent | Patent | |||||||||||
| Total Assets | $850,000 | Total Assets | Total Assets | |||||||||||
| AP | $110,000 | AP | AP | |||||||||||
| 2 | Common Stock | $395,000 | Common Stock | Common Stock | ||||||||||
| Additional Paid In Capital | $300,000 | Additional Paid In Capital | Additional Paid In Capital | |||||||||||
| Retained Earnings | $45,000 | Retained Earnings | Retained Earnings | |||||||||||
| Total Liabilities & Equity | $850,000 | Total Liabilities & Equity | Total Liabilities & Equity | |||||||||||
| Little Company Balance Sheet | ||||||||||||||
| Assets, Liabilities & Equities | Book Value | |||||||||||||
| Cash | $35,000 | |||||||||||||
| AR | $10,000 | |||||||||||||
| Inventory | $65,000 | |||||||||||||
| Land | $40,000 | |||||||||||||
| PP&E | $40,000 | |||||||||||||
| Accumulated Depreciation | -$5,000 | |||||||||||||
| 3 | Patent | $0 | ||||||||||||
| Total Assets | $185,000 | |||||||||||||
| AP | $25,000 | |||||||||||||
| Common Stock | $25,000 | |||||||||||||
| Additional Paid In Capital | $35,000 | |||||||||||||
| Retained Earnings | $100,000 | |||||||||||||
| Total Liabilities & Equity | $185,000 | |||||||||||||
| Assume that Fair Value of all noncash assets are 25% greater than book value | ||||||||||||||
| 4 | ||||||||||||||
| 5 |