Homework Answers
a) Entry that the parent company makes to record the investment:
GENERAL JOURNAL
| Description | Debit | Credit |
| Equity investment | $300000 | |
| Common stock | $30000 | |
| Additional paid in capital | $270000 |
- Equity investment
= Total shares × market value per share
= 30000×$10
= $300000
- Common stock, at par
= Total shares × par value of a share
= 30000×$1
= $30000
- Additional paid in capital
= Total equity investment - Par value of common stock
= $300000 - $30000
= $270000
b) Preoaration of the [E] and [A] consolidation entries:
CONSOLIDATION WORKSHEET
| . | Description | Debit | Credit |
| [E] | Common stock | $90000 | |
| Retained Earnings | $135000 | ||
| Equity investment | $225000 | ||
| [To eliminate the stockholders equity of subsidary on the acquisition date] | |||
| [A] | PPE (net) | $75000 | |
| Equity investment | $75000 | ||
| [To record the (A) assets purchased on acqusition date] |
*PPE (net)
= Fair value of PPE on acqusition date - Book value of PPE on acqusition date
= $195000 - $120000
= $75000
______×_______
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