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Assignment Accounting for Corporate Entities 3rd 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 (Polos) $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 stockholders equity sections of the two companies balance sheets on December 31, 2010, were: Polo $350,000 $590,000 $380,000 Save $320,000 $175,000 $205,000

Common Stock, $10 par value Other Contributed Income Retained Earnings

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 Cash Other Contributed Capital 400000 300000 720000 20000 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 $192.000 cash. Just before the acquisition, the balance sheets of the two companies were as follows: Prunce ($) 260,000 142,000 117,000 386,000 63,000 968,000 104,000 72,000 400,000 208,000 184,000 968,000 Sun ($) 64,000 23,000 54,000 98,000 32,000 271,000 47,000 39,000 70,000 20,000 95,000 271,000

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

The fair values of Sun Companys assets and liabilities are equal to their book values with the exception of land. Required:

a) Prepare a journal entry to record the purchase of Sun Companys common stock b) Prepare a consolidated balance sheet at the date of acquisition Answer Requirement A Journal entry to record the purchase of Sun Companys common stock Investment in Sun Company (90%) Cash Requirement B - Consolidated balance sheet at the date of acquisition
Consolidated Balance Sheet Prunce Company and Subsidiary Elimination Debit Credit $ 192,000

192000 192000

Prunce Cash* Accounts receivable (net) Inventory Plant and Equipment (net) Land** Total Assets Accounts Payable Mortgage payable Common Stock, $2 par value Other contributed capital Retained earnings Non-controlling interest*** Total equity $ $ $ $ $ $ $ $ $ $ $ $ 260,000 142,000 117,000 386,000 63,000 968,000 104,000 72,000 400,000 208,000 184,000 968,000

Sun $ 64,000 $ 23,000 $ 54,000 $ 98,000 $ 32,000 $ 271,000 $ $ $ $ $ $ 47,000 39,000 70,000 20,000 95,000 271,000

Consolidated $ 132,000 $ 165,000 $ 171,000 $ 484,000 $ 120,500 $ 1,072,500 $ 151,000 $ 111,000 $ 400,000 $ 208,000 $ 184,000 $ 18,500 $ 1,072,500

25,500

$ $ $ $

70,000 20,000 95,000 210,500 $ 18,500 $ 210,500

Information: * ** *** **** 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

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