On January 1, 2023. Parent Company Inc. acquired 100% of Subsidiary Corp.'s outstanding common stock by exchanging 37,500 shares of Parent's $2 par value common voting stock. On January 1, 2023, Parent's voting common stock had a fair value of $40 per share. On January 1, 2023, Subsidiary Corp.'s voting common shares were selling for $6.50 per share. Subsidiary Corp.'s balances on the acquisition date, just prior to acquisition are listed below Cash Accounts Receivable Inventory Land Building (net) Equipment (net) Accounts Payable Common Stock, $1 par Paid-in Capital Retained Earnings, 1/1/3 Book Value 30,000 $ 120,000 200,000 230,000 450,000 175,000 80,000 500,000 350,000 275,000 Fair Value 30,000 120,000 230,000 290,000 600,000 160,000 80,000 Required: Present the analysis of this combinations, compute the value of Goodwill resulting from the acquisition and prepare the journal entries of acquisition.

On January 1, 2023. Parent Company Inc. acquired 100% of Subsidiary Corp.'s outstanding common stock by exchanging 37,500 shares of Parent's $2 par value common voting stock. On January 1, 2023, Parent's voting common stock had a fair value of $40 per share. On January 1, 2023, Subsidiary Corp.'s voting common shares were selling for $6.50 per share. Subsidiary Corp.'s balances on the acquisition date, just prior to acquisition are listed below Cash Accounts Receivable Inventory Land Building (net) Equipment (net) Accounts Payable Common Stock, $1 par Paid-in Capital Retained Earnings, 1/1/3 Book Value 30,000 $ 120,000 200,000 230,000 450,000 175,000 80,000 500,000 350,000 275,000 Fair Value 30,000 120,000 230,000 290,000 600,000 160,000 80,000 Required: Present the analysis of this combinations, compute the value of Goodwill resulting from the acquisition and prepare the journal entries of acquisition.

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

ChapterA2: Investments

Section: Chapter Questions

Problem 25E

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