Cheapbeer inc purchased 100 of the outstanding stock

This preview shows page 3 out of 3 pages.

CheapBeer Inc. purchased 100% of the outstanding stock of FancyBrew Inc. for purposes of horizontal consolidation and paid $500,000 cash for the stock. The balance sheets for the two companies immediately after the acquisition are as follows: FancyBrew Inc. CheapBeer Inc. Balance Sheet as of 5/15/17 Balance Sheet as of 5/15/17 Assets Liabilities & Owners' Equity Assets Liabilities & Owners' Equity Book Value Book Value Book Value Book Value Cash $0 $0 A/P $100,000 $100,000 Cash $300,000 A/P $250,000 A/R 80,000 70,000 Notes Payable 30,000 30,000 A/R 200,000 Notes Payable 150,000 Inventory 75,000 80,000 Mortgage Payable 75,000 75,000 Inventory 400,000 Mortgage Payable 50,000 Net Fixed Assets 205,000 325,000 Total Liabilities: $205,000 Net Fixed Assets 250,000 Total Liabilities: $450,000 Patents 0 20,000 Investment in Subsidiary 500,000 Common Stock 50,000 Common Stock 250,000 Retained Earnings 105,000 Retained Earnings 950,000 Total Equity: $155,000 Total Equity: $1,200,000 Total Assets: $360,000 Total Liabilities & O.E.: $360,000 Total Assets: $1,650,000 Total Liabilities & O.E.: $1,650,000 Entry "A" Eliminate the subsidiary's equity against the parent's investment account Entry "B" Adjust the net assets of the subsidiary to Fair Market Value and offset to the investment Entry "C" Any remaining amount in the investment account gets eliminated to Goodwill Fair Market Value Fair Market Value A) Complete the below Consolidation Entries for the "Consolidation & Elimination Worksheet" for this acquisition as of the date of the acquisition by entering the proper debit and credit amounts in the gray-shaded cells below. When a correct figure is entered, the cell will change color. Trial Balances Combined Consolidation Entries Consolidated Balance Account CheapBeer FancyBrew Entry Debit Entry Credit Cash $300,000 $0 $300,000 $300,000 A/R 200,000 80,000 280,000 "B" $10,000 270,000 Inventory 400,000 75,000 475,000 "B" $5,000 480,000 Net Fixed Assets 250,000 205,000 455,000 "B" 120,000 575,000 Patents 0 0 0 "B" 20,000 20,000 Investment in Subsidiary 500,000 0 500,000 "A" 155,000 0 "B" 135,000 0 "C" 210,000 Goodwill 0 0 0 "C" 210,000 210,000 A/P (250,000) (100,000) (350,000) (350,000) Notes Payable (150,000) (30,000) (180,000) (180,000) Mortgage Payable (50,000) (75,000) (125,000) (125,000) Common Stock - CheapBeer (250,000) 0 (250,000) (250,000) Common Stock - FancyBrew 0 (50,000) (50,000) "A" 50,000 0 Retained Earnings - CheapBeer (950,000) 0 (950,000) (950,000) Retained Earnings - FancyBrew 0 (105,000) (105,000) "A" 105,000 0 Totals $0 $0 $0 $510,000 $510,000 $0

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture