Answered: 1. Prepare the journal entry on Pipe…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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On July 1, 2014, Pipe Corporation issued 23,000 shares of its own $2 par value common stock for 40,000 shares of the outstanding stock of Sector Inc. in an acquisition. Pipe common stock at July 1, 2014 was selling at $16 per share. Just before the business combination, balance sheet information of the two corporations was as follows:

Required:
1. Prepare the journal entry on Pipe Corporation's books to account for the investment in Sector Inc.
2. Prepare a consolidated balance sheet for Pipe Corporation and Subsidiary immediately after the business combination.

Вook
Вook
Fair
Value
$25,000
Value
$17,000
Value
$17,000
Cash
Inventories
55,000
110,000
100,000
Plant and equipment-net 660,000
$950,000
42,000
47,000
Other current assets
40,000
30,000
Land
45,000
35,000
220,000
$364,000
280,000
$409,000
Liabilities
$220,000
$70,000
$75,000
Capital stock, $2 par value 500,000
Additional paid-in capital 170,000
Retained earnings
100,000
90,000
60.000
$950,000
104,000
$364,000

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