ANSWER:
(E)
Common stock, par value. 10
Additional paid in capital. 150
retained earnings. 260
treasury stock. 50
accumulated other comprehensive income. 70
investment in softcloud. 350
(R)
property, plant and equimpent. 600
favorable lease agreement 150
goodwill. 500
inventories. 50
long term debt. 350
investment in softcloud. 850
QUESTION:
How do you get the 350 & 850 from "investment in softcloud"?
what is the steps and what does it mean?
Homework Answers
a) the first entry pertains to adjustment of total assets to net assets in softcloud at book value (which is nothing but owners equity which is worked out in below table)
| Particulars | Amount | Remarks |
| Common stock, par value. | 10 | |
| Additional paid in capital. | 200 | additional paid in capital as per question is 200 but 150 considered in entry |
| retained earnings. | 260 | |
| treasury stock. | -50 | |
| accumulated other comprehensive income. | -70 | |
| investment in softcloud. (sum of all the above) | 350 |
b) the second entry pertains to adjustment of investment to fairvalue gain and identification of goodwill which is explained in the below table.
| Particulars | Amount | Remarks |
| Balance investment in softcloud post adjustment with Net Assets at book value (1200-350) | 850 | |
| Less: Adjustment towards fair valuation of assets | ||
| property, plant and equimpent. (fair value - book value) | 600 | |
| favorable lease agreement (fair value) | 150 | |
| inventories. (fair value - book value) | -50 | |
| long term debt. (book value - minus fair value) | -350 | As this is debt increase in debt will lead to adverse adjustment |
| goodwill. | 500 |
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ANSWER:
(E)
Common stock, par value. 10
Additional paid in capital. 150
retained earnings....
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