Acquisition of shares is a process by which controlling interest in a company could be attained by purchasing majority shares of the company. In this process, shares acquired are recorded as investments in the books of the acquiring company. To prepare: Journal entries to record acquisition of additional shares.

Question

Want to see the full answer?

Answer 1

Question

Chapter 1, Problem 1.27P

To determine

Introduction: Acquisition of shares is a process by which controlling interest in a company could be attained by purchasing majority shares of the company. In this process, shares acquired are recorded as investments in the books of the acquiring company.

To prepare: Journal entries to record acquisition of additional shares.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

On Dec. 4, 20x1, Brown Co. acquired 6,000 shares of Venice, Inc. for $50,000. Brown incurred transaction costs of $2,500 in the acquisition. Brown acquired the shares principally for the purpose of selling them in the near term. On Dec. 31, 20x1, Venice's shares are qouted at $5 per share. Brown sold half of the investment on Jan 3, 20x2 at $7.50 per share. Brown incurred transaction cost of $1,500 on the sale. What amount of gain(loss) is recognized on Dec. 1, 20x1 and Jan 3, 20x2, respectively? a. (20,000); 6,000 b. (20,000); 13,500 c. (22,500);6,000 d. 22,500;13,500

X Company purchased a (100%) controlling interest in Y Company by issuing $2,000,000 worth of common shares. The business combination agreement has an earnout clause that states the following: X Company would pay 10% of any earnings in excess of $750,000 to Y's shareholders in the first year following the acquisition. On acquisition date, X's shares had a market value of $80 per share.Required:a) Assuming that Y's net income in the first year following the acquisition was $950,000, prepare any journal entries (for X Company) that are necessary to reflect Y's results under IFRS 3 Business Combinations.b) Assuming that the agreement called for Y's shareholders to be compensated with 1,250 shares for any decline in X's share price, what journal entries would be required under IFRS 3, if the market value of X's shares dropped to $64 within the year?

Peal Corportion issues 4,000 shares of its $10 par value stock with a market value of $85,000 to acquire 85 percent of the common stock of Seed Company on August 31, 20X3. Seed's fair value was determined to be $100,000 on that date. Peal had previously purchased 15% of Seed's common stock for $9,000 on January 31, 20X1, and had carried this investment at fair value on its balance. Peal reported this investment at $15,000 on its balance sheet at August 31, 20X3, immediately prior to acquiring the remaining 85 percent of Seed's shares. On August 31, 20X3, Peal also paid appraisal fees of $3,500 and stock issue costs of $2,000 incurred in completing the acquisition of the additional shares. Prepare the journal entries to be recorded by Peal in completing the acquisition of the additional shares. a) Record the acquisition of ownership in Seed Company by the issuance of shares. Record the payment of appraisal fee incurred in completing the acquisition of the additional shares. b) Record…