Assignment Accounting for Corporate Entities rd
3
Assignment Stream A
(Mrs. Golrida Karyawati)
Due date: Sunday, March 31, 2013
Created by: GROUP 3 Prinda Eryana .H (2011210020) Reitha Mahardhika Kartika Junior (2011210032) Rika Novian Dita (2011210024)
Sampoerna School of Business
Exercise 3-2 Stock Purchase Entries
On January 1, 2011, Polo Company purchased 100% of the common stock of Save Company by issuing 40,000 shares of its (Polo’s) $10 par value common stock with a market price of $17.50 per share. Polo incurred cash expenses of $20,000 for registering and issuing the common stock. The stockholder’s equity sections of the two companies’ balance sheets on December 31, 2010, were: Polo $350,000 $590,000 $380,000
Common Stock, $10 par value Other Contributed Income Retained Earnings
Save $320,000 $175,000 $205,000
Required: a) Prepare the journal entry on the books of Polo company to record the purchased of the common stock of save company and related expenses b) Prepare the elimination entry required for the preparation of a consolidated balance sheet work paper on the date of acquisition Answer Requirement A – Journal entry to book the common stock
Investment in Save Company Common Stock Other Contriburted Capital Other Contributed Capital Cash
720000 400000 300000 20000 20000
Requirement B – Elimination entry for stockholders equity
Common Stock Other Contributed Capital Investment in Save Company
400000 300000 720000
Cash
20000 Other Contributed Capital
20000
Exercise 3-3 Consolidated Balance Sheet, Stock Purchase
On January 2, 2011, Prunce Company acquired 90% of the outstanding common stock of Sun Company for $192.000 cash. Just before the acquisition, the balance sheets of the two companies were as follows:
Cash Account Receivable(net) Inventory Plant and Equipment (net) Land Total Assets Account Payable Mortgage Payable Common Stock, $2 par value Other Contributed Income Retained Earnings Total Liabilities and Equities
Prunce ($) 260,000
Sun ($) 64,000
142,000 117,000 386,000 63,000 968,000 104,000 72,000 400,000 208,000 184,000 968,000
23,000 54,000 98,000 32,000 271,000 47,000 39,000 70,000 20,000 95,000 271,000
The fair values of Sun Company’s assets and liabilities are equal to their book values with the exception of land. Required:
a) Prepare a journal entry to recor d the purchase of Sun Company’s common stock b) Prepare a consolidated balance sheet at the date of acquisition Answer Requirement A – Journal entry to record the purchase of Sun Company’s common stock
Investment in Sun Company (90%)
192000
Cash
192000
Requirement B - Consolidated balance sheet at the date of acquisition
Consolidated Balance Sheet Prunce Company and Subsidiary
Prunce
Elimination
Sun
Cash*
$
260,000
$
64,000
Accounts receivable (net)
$
142,000
$
Inventory
$
117,000
Plant and Equipment (net)
$
Land**
Debit
Credit
$
132,000
23,000
$
165,000
$
54,000
$
171,000
386,000
$
98,000
$
484,000
$
63,000
$
32,000
$
120,500
$
968,000
$
271,000
$ 1,072,500
Accounts Payable
$
104,000
$
47,000
$
151,000
Mortgage payable
$
72,000
$
39,000
$
111,000
Common Stock, $2 par value
$
400,000
$
70,000
$
70,000
$
400,000
Other contributed capital
$
208,000
$
20,000
$
20,000
$
208,000
Retained earnings
$
184,000
$
95,000
$
95,000
$
184,000
$
18,500
Total Assets
$ 192,000
Consolidated
$
25,500
Non-controlling interest*** Total equity
$ $
968,000
$
271,000
$
210,500
18,500
$ 210,500
$ 1,072,500
I nformation: * ** *** ****
Cash 260,000 + 64,000 - 192,000 = 132000 Land 63,000 + 32,000 + 25,500**** = 120,500 Non-controlling interest (70,000 + 20,000 + 95,000)*10% = 18,500 Cost - Book value acquired = 192,000 - [(70,000 + 20,000 + 95,000)* 90 %] = 25,500
