Question

Albuquerque, Inc., acquired 36,000 shares of Marmon Company several years ago for $900,000. At the acquisition date, Marmon reported a book value of $980,000, and Albuquerque assessed the fair value of the noncontrolling interest at $100,000. Any excess of acquisition date fair value over book value was assigned to broadcast licenses with indefinite lives. Since the acquisition date and until this point, Marmon has issued no additional shares. No impairment has been recognized for the broadcast licenses At the present time, Marmon reports $1,110,000 as total stockholders' equity, which is broken down as follows: Common stock ($11 par value) Additional paid-in capital Retained earnings Total $ 440,000 460,000 210,000 $1,110,000 View the following as independent situations: a. & b. Marmon sells 8,000 and 5,000 shares of previously unissued common stock to the public for $30 and $20 per share. Albuquerque purchased none of this stock. What journal entry should Albuquerque make to recognize the impact of this stock transaction? (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round your intermediate calculations.)

A. Record the entry to recognize the impact of selling of 8,000 shares.

B. Record the entry to recognize the impact of selling of 5,000 shares.

Answer 1

particulars				Debit	Credit
1	investment in marmon			10500
	additional paid in capital				10500
2	additional paid in capital			33000
	investment in marmon				33000
calculation of addtitional paid in capital increase/decrease
at the beginning acquisition interest 36000/440000/11						90%
till date fair value adjustment (900000+100000)+(1110000-980000)						1130000
adjusted till date of fair value after stock issue 1130000+(8000*30)						1370000
interest after share issue 36000/(40000+8000)						75%
investment equity balance-before issuance of share 900000+(130000*90%)						1017000
implied book value of investment after share issue (1370000*75%)						1027500
additional paid in capital- increase						10500
at the beginning acquisition interest 36000/440000/11						90%
till date fair value adjustment (900000+100000)+(1110000-980000)						1130000
adjusted till date of fair value after stock issue 1130000+(5000*20)						1230000
interest after share issue 36000/(40000+5000)						80%
investment equity balance-before issuance of share 900000+(130000*90%)						1017000
implied book value of investment after share issue (1230000*80%)						984000
additional paid in capital- decrease						-33000