Journal entries that Company R would record for acquisition. Introduction: Internal expansion refers to situation in a company forms a subsidiary by transferring some of its assets and liabilities and in exchange of ownership shares. Shares of the subsidiary is either provided to the shareholders in addition to their existing shares (Spin off) or in exchange of their existing shares (split off).

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Answer 1

Question

Chapter 1, Problem 1.35P

a.

To determine

To prepare: Journal entries that Company R would record for acquisition.

Introduction: Internal expansion refers to situation in a company forms a subsidiary by transferring some of its assets and liabilities and in exchange of ownership shares. Shares of the subsidiary is either provided to the shareholders in addition to their existing shares (Spin off) or in exchange of their existing shares (split off).

a.

Expert Solution

Explanation of Solution

In the books of Company P:

Record transfer of assets and liabilities:

Date	Account	Debit ($)	Credit($)
	Cash	30,000
	Accounts Receivable	60,000
	Inventory	160,000
	Land	30,000
	Building and Equipment	350,000
	Bond Discount	5,000
	Goodwill	125,000₁
	Accounts payable		10,000
	Bonds payable		150,000
	Common Stock		80,000
	Additional Paid-in Capital		520,000
	(To record transfer of assets and liabilities)

Table (1)

Cash is an asset and it is increased by $30,000. Therefore, cash account is debited with $30,000.

Accounts Receivable is an asset and it is increased by $60,000. Therefore, Accounts Receivable account is debited with $60,000.

Inventory is an asset and it is increased by $160,000. Therefore, Accounts Inventory is debited with $160,000.

Land is an asset and it is increased by $30,000. Therefore, Land is debited with $30,000.

Building and equipment is an asset and it is increased by $350,000. Therefore, Building and equipment is debited with $350,000.

Bond discount is an asset and it is increased by $5,000. Therefore, Bond discount is debited with $5,000.

Goodwill is an asset and it is increased by $125,000. Therefore, Goodwill is debited with $125,000.

Accounts Payable is a liability and it is increased by $10,000. Therefore, Accounts Payable account is credited with $10,000.

Bonds Payable is a liability and it is increased by $150,000. Therefore, Bonds Payable account is credited with $150,000.

Common Stock is equity and it is increased by $80,000. Therefore, Common Stock account is credited with $80,000.

Additional paid in capital is equity and it is increased by $520,000. Therefore, Additional paid in capital account is credited with $520,000.

Deferred stock issue cost is equity and it is increased by $9,000. Therefore, Deferred stock issue cost account is credited with $9,000.

Working Note:

Calculation of goodwill:

Particulars	Amount
Fair value of consideration given (4,000×$150)	$600,000
Fair value of net assets acquired ($630,000−$10,000−$145,000)	($475,000)
Goodwill	$125,000

Table (2)

b.

To determine

To prepare: Balance sheet immediately following the acquisition.

Introduction: Internal expansion refers to situation in a company forms a subsidiary by transferring some of its assets and liabilities and in exchange of ownership shares. Shares of the subsidiary is either provided to the shareholders in addition to their existing shares (Spin off) or in exchange of their existing shares (split off).

b.

Expert Solution

Explanation of Solution

The balance sheet immediately following the acquisition:

	Company RCombined Balance SheetJanuary 1, 20X2
Assets		Amount($)	Liabilities	Amount($)	Amount($)
Current Assets			Current Liabilities
Cash		100,000	Accounts payable		60,000
Accounts receivables		160,000	Bonds payable	450,000
Inventory		360,000	Less: Discount	(5,000)	445,000
Fixed Assets
Land		80,000	Common Stock
Building and equipment	950,000		Common Stock		280,000
Less: Accumulated depreciation	(250,000)	700,000	Additional Paid-in capital		560,000
Goodwill		125,000	Retained Earnings		180,000

		1,525,000			1,525,000

Table (3)

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Answer 2

Question

Chapter 1, Problem 1.35P

a.

To determine

To prepare: Journal entries that Company R would record for acquisition.

Introduction: Internal expansion refers to situation in a company forms a subsidiary by transferring some of its assets and liabilities and in exchange of ownership shares. Shares of the subsidiary is either provided to the shareholders in addition to their existing shares (Spin off) or in exchange of their existing shares (split off).

a.

Expert Solution

Explanation of Solution

In the books of Company P:

Record transfer of assets and liabilities:

Date	Account	Debit ($)	Credit($)
	Cash	30,000
	Accounts Receivable	60,000
	Inventory	160,000
	Land	30,000
	Building and Equipment	350,000
	Bond Discount	5,000
	Goodwill	125,000₁
	Accounts payable		10,000
	Bonds payable		150,000
	Common Stock		80,000
	Additional Paid-in Capital		520,000
	(To record transfer of assets and liabilities)

Table (1)

Cash is an asset and it is increased by $30,000. Therefore, cash account is debited with $30,000.

Accounts Receivable is an asset and it is increased by $60,000. Therefore, Accounts Receivable account is debited with $60,000.

Inventory is an asset and it is increased by $160,000. Therefore, Accounts Inventory is debited with $160,000.

Land is an asset and it is increased by $30,000. Therefore, Land is debited with $30,000.

Building and equipment is an asset and it is increased by $350,000. Therefore, Building and equipment is debited with $350,000.

Bond discount is an asset and it is increased by $5,000. Therefore, Bond discount is debited with $5,000.

Goodwill is an asset and it is increased by $125,000. Therefore, Goodwill is debited with $125,000.

Accounts Payable is a liability and it is increased by $10,000. Therefore, Accounts Payable account is credited with $10,000.

Bonds Payable is a liability and it is increased by $150,000. Therefore, Bonds Payable account is credited with $150,000.

Common Stock is equity and it is increased by $80,000. Therefore, Common Stock account is credited with $80,000.

Additional paid in capital is equity and it is increased by $520,000. Therefore, Additional paid in capital account is credited with $520,000.

Deferred stock issue cost is equity and it is increased by $9,000. Therefore, Deferred stock issue cost account is credited with $9,000.

Working Note:

Calculation of goodwill:

Particulars	Amount
Fair value of consideration given (4,000×$150)	$600,000
Fair value of net assets acquired ($630,000−$10,000−$145,000)	($475,000)
Goodwill	$125,000

Table (2)

b.

To determine

To prepare: Balance sheet immediately following the acquisition.

Introduction: Internal expansion refers to situation in a company forms a subsidiary by transferring some of its assets and liabilities and in exchange of ownership shares. Shares of the subsidiary is either provided to the shareholders in addition to their existing shares (Spin off) or in exchange of their existing shares (split off).

b.

Expert Solution

Explanation of Solution

The balance sheet immediately following the acquisition:

	Company RCombined Balance SheetJanuary 1, 20X2
Assets		Amount($)	Liabilities	Amount($)	Amount($)
Current Assets			Current Liabilities
Cash		100,000	Accounts payable		60,000
Accounts receivables		160,000	Bonds payable	450,000
Inventory		360,000	Less: Discount	(5,000)	445,000
Fixed Assets
Land		80,000	Common Stock
Building and equipment	950,000		Common Stock		280,000
Less: Accumulated depreciation	(250,000)	700,000	Additional Paid-in capital		560,000
Goodwill		125,000	Retained Earnings		180,000

		1,525,000			1,525,000

Table (3)

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Answer 3

Question

Chapter 1, Problem 1.35P

a.

To determine

To prepare: Journal entries that Company R would record for acquisition.

Introduction: Internal expansion refers to situation in a company forms a subsidiary by transferring some of its assets and liabilities and in exchange of ownership shares. Shares of the subsidiary is either provided to the shareholders in addition to their existing shares (Spin off) or in exchange of their existing shares (split off).

a.

Expert Solution

Explanation of Solution

In the books of Company P:

Record transfer of assets and liabilities:

Date	Account	Debit ($)	Credit($)
	Cash	30,000
	Accounts Receivable	60,000
	Inventory	160,000
	Land	30,000
	Building and Equipment	350,000
	Bond Discount	5,000
	Goodwill	125,000₁
	Accounts payable		10,000
	Bonds payable		150,000
	Common Stock		80,000
	Additional Paid-in Capital		520,000
	(To record transfer of assets and liabilities)

Table (1)

Cash is an asset and it is increased by $30,000. Therefore, cash account is debited with $30,000.

Accounts Receivable is an asset and it is increased by $60,000. Therefore, Accounts Receivable account is debited with $60,000.

Inventory is an asset and it is increased by $160,000. Therefore, Accounts Inventory is debited with $160,000.

Land is an asset and it is increased by $30,000. Therefore, Land is debited with $30,000.

Building and equipment is an asset and it is increased by $350,000. Therefore, Building and equipment is debited with $350,000.

Bond discount is an asset and it is increased by $5,000. Therefore, Bond discount is debited with $5,000.

Goodwill is an asset and it is increased by $125,000. Therefore, Goodwill is debited with $125,000.

Accounts Payable is a liability and it is increased by $10,000. Therefore, Accounts Payable account is credited with $10,000.

Bonds Payable is a liability and it is increased by $150,000. Therefore, Bonds Payable account is credited with $150,000.

Common Stock is equity and it is increased by $80,000. Therefore, Common Stock account is credited with $80,000.

Additional paid in capital is equity and it is increased by $520,000. Therefore, Additional paid in capital account is credited with $520,000.

Deferred stock issue cost is equity and it is increased by $9,000. Therefore, Deferred stock issue cost account is credited with $9,000.

Working Note:

Calculation of goodwill:

Particulars	Amount
Fair value of consideration given (4,000×$150)	$600,000
Fair value of net assets acquired ($630,000−$10,000−$145,000)	($475,000)
Goodwill	$125,000

Table (2)

b.

To determine

To prepare: Balance sheet immediately following the acquisition.

Introduction: Internal expansion refers to situation in a company forms a subsidiary by transferring some of its assets and liabilities and in exchange of ownership shares. Shares of the subsidiary is either provided to the shareholders in addition to their existing shares (Spin off) or in exchange of their existing shares (split off).

b.

Expert Solution

Explanation of Solution

The balance sheet immediately following the acquisition:

	Company RCombined Balance SheetJanuary 1, 20X2
Assets		Amount($)	Liabilities	Amount($)	Amount($)
Current Assets			Current Liabilities
Cash		100,000	Accounts payable		60,000
Accounts receivables		160,000	Bonds payable	450,000
Inventory		360,000	Less: Discount	(5,000)	445,000
Fixed Assets
Land		80,000	Common Stock
Building and equipment	950,000		Common Stock		280,000
Less: Accumulated depreciation	(250,000)	700,000	Additional Paid-in capital		560,000
Goodwill		125,000	Retained Earnings		180,000

		1,525,000			1,525,000

Table (3)

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Answer 4

Question

Chapter 1, Problem 1.35P

a.

To determine

To prepare: Journal entries that Company R would record for acquisition.

Introduction: Internal expansion refers to situation in a company forms a subsidiary by transferring some of its assets and liabilities and in exchange of ownership shares. Shares of the subsidiary is either provided to the shareholders in addition to their existing shares (Spin off) or in exchange of their existing shares (split off).

a.

Expert Solution

Explanation of Solution

In the books of Company P:

Record transfer of assets and liabilities:

Date	Account	Debit ($)	Credit($)
	Cash	30,000
	Accounts Receivable	60,000
	Inventory	160,000
	Land	30,000
	Building and Equipment	350,000
	Bond Discount	5,000
	Goodwill	125,000₁
	Accounts payable		10,000
	Bonds payable		150,000
	Common Stock		80,000
	Additional Paid-in Capital		520,000
	(To record transfer of assets and liabilities)

Table (1)

Cash is an asset and it is increased by $30,000. Therefore, cash account is debited with $30,000.

Accounts Receivable is an asset and it is increased by $60,000. Therefore, Accounts Receivable account is debited with $60,000.

Inventory is an asset and it is increased by $160,000. Therefore, Accounts Inventory is debited with $160,000.

Land is an asset and it is increased by $30,000. Therefore, Land is debited with $30,000.

Building and equipment is an asset and it is increased by $350,000. Therefore, Building and equipment is debited with $350,000.

Bond discount is an asset and it is increased by $5,000. Therefore, Bond discount is debited with $5,000.

Goodwill is an asset and it is increased by $125,000. Therefore, Goodwill is debited with $125,000.

Accounts Payable is a liability and it is increased by $10,000. Therefore, Accounts Payable account is credited with $10,000.

Bonds Payable is a liability and it is increased by $150,000. Therefore, Bonds Payable account is credited with $150,000.

Common Stock is equity and it is increased by $80,000. Therefore, Common Stock account is credited with $80,000.

Additional paid in capital is equity and it is increased by $520,000. Therefore, Additional paid in capital account is credited with $520,000.

Deferred stock issue cost is equity and it is increased by $9,000. Therefore, Deferred stock issue cost account is credited with $9,000.

Working Note:

Calculation of goodwill:

Particulars	Amount
Fair value of consideration given (4,000×$150)	$600,000
Fair value of net assets acquired ($630,000−$10,000−$145,000)	($475,000)
Goodwill	$125,000

Table (2)

b.

To determine

To prepare: Balance sheet immediately following the acquisition.

Introduction: Internal expansion refers to situation in a company forms a subsidiary by transferring some of its assets and liabilities and in exchange of ownership shares. Shares of the subsidiary is either provided to the shareholders in addition to their existing shares (Spin off) or in exchange of their existing shares (split off).

b.

Expert Solution

Explanation of Solution

The balance sheet immediately following the acquisition:

	Company RCombined Balance SheetJanuary 1, 20X2
Assets		Amount($)	Liabilities	Amount($)	Amount($)
Current Assets			Current Liabilities
Cash		100,000	Accounts payable		60,000
Accounts receivables		160,000	Bonds payable	450,000
Inventory		360,000	Less: Discount	(5,000)	445,000
Fixed Assets
Land		80,000	Common Stock
Building and equipment	950,000		Common Stock		280,000
Less: Accumulated depreciation	(250,000)	700,000	Additional Paid-in capital		560,000
Goodwill		125,000	Retained Earnings		180,000

		1,525,000			1,525,000

Table (3)

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Answer 5

Chapter 1, Problem 1.35P

a.

To determine

To prepare: Journal entries that Company R would record for acquisition.

Introduction: Internal expansion refers to situation in a company forms a subsidiary by transferring some of its assets and liabilities and in exchange of ownership shares. Shares of the subsidiary is either provided to the shareholders in addition to their existing shares (Spin off) or in exchange of their existing shares (split off).

a.

Expert Solution

Explanation of Solution

In the books of Company P:

Record transfer of assets and liabilities:

Date	Account	Debit ($)	Credit($)
	Cash	30,000
	Accounts Receivable	60,000
	Inventory	160,000
	Land	30,000
	Building and Equipment	350,000
	Bond Discount	5,000
	Goodwill	125,000₁
	Accounts payable		10,000
	Bonds payable		150,000
	Common Stock		80,000
	Additional Paid-in Capital		520,000
	(To record transfer of assets and liabilities)

Table (1)

Cash is an asset and it is increased by $30,000. Therefore, cash account is debited with $30,000.

Accounts Receivable is an asset and it is increased by $60,000. Therefore, Accounts Receivable account is debited with $60,000.

Inventory is an asset and it is increased by $160,000. Therefore, Accounts Inventory is debited with $160,000.

Land is an asset and it is increased by $30,000. Therefore, Land is debited with $30,000.

Building and equipment is an asset and it is increased by $350,000. Therefore, Building and equipment is debited with $350,000.

Bond discount is an asset and it is increased by $5,000. Therefore, Bond discount is debited with $5,000.

Goodwill is an asset and it is increased by $125,000. Therefore, Goodwill is debited with $125,000.

Accounts Payable is a liability and it is increased by $10,000. Therefore, Accounts Payable account is credited with $10,000.

Bonds Payable is a liability and it is increased by $150,000. Therefore, Bonds Payable account is credited with $150,000.

Common Stock is equity and it is increased by $80,000. Therefore, Common Stock account is credited with $80,000.

Additional paid in capital is equity and it is increased by $520,000. Therefore, Additional paid in capital account is credited with $520,000.

Deferred stock issue cost is equity and it is increased by $9,000. Therefore, Deferred stock issue cost account is credited with $9,000.

Working Note:

Calculation of goodwill:

Particulars	Amount
Fair value of consideration given (4,000×$150)	$600,000
Fair value of net assets acquired ($630,000−$10,000−$145,000)	($475,000)
Goodwill	$125,000

Table (2)

b.

To determine

To prepare: Balance sheet immediately following the acquisition.

Introduction: Internal expansion refers to situation in a company forms a subsidiary by transferring some of its assets and liabilities and in exchange of ownership shares. Shares of the subsidiary is either provided to the shareholders in addition to their existing shares (Spin off) or in exchange of their existing shares (split off).

b.

Expert Solution

Explanation of Solution

The balance sheet immediately following the acquisition:

	Company RCombined Balance SheetJanuary 1, 20X2
Assets		Amount($)	Liabilities	Amount($)	Amount($)
Current Assets			Current Liabilities
Cash		100,000	Accounts payable		60,000
Accounts receivables		160,000	Bonds payable	450,000
Inventory		360,000	Less: Discount	(5,000)	445,000
Fixed Assets
Land		80,000	Common Stock
Building and equipment	950,000		Common Stock		280,000
Less: Accumulated depreciation	(250,000)	700,000	Additional Paid-in capital		560,000
Goodwill		125,000	Retained Earnings		180,000

		1,525,000			1,525,000

Table (3)

Answer 6

Chapter 1, Problem 1.35P

a.

To determine

To prepare: Journal entries that Company R would record for acquisition.

Introduction: Internal expansion refers to situation in a company forms a subsidiary by transferring some of its assets and liabilities and in exchange of ownership shares. Shares of the subsidiary is either provided to the shareholders in addition to their existing shares (Spin off) or in exchange of their existing shares (split off).

a.

Expert Solution

Explanation of Solution

In the books of Company P:

Record transfer of assets and liabilities:

Date	Account	Debit ($)	Credit($)
	Cash	30,000
	Accounts Receivable	60,000
	Inventory	160,000
	Land	30,000
	Building and Equipment	350,000
	Bond Discount	5,000
	Goodwill	125,000₁
	Accounts payable		10,000
	Bonds payable		150,000
	Common Stock		80,000
	Additional Paid-in Capital		520,000
	(To record transfer of assets and liabilities)

Table (1)

Cash is an asset and it is increased by $30,000. Therefore, cash account is debited with $30,000.

Accounts Receivable is an asset and it is increased by $60,000. Therefore, Accounts Receivable account is debited with $60,000.

Inventory is an asset and it is increased by $160,000. Therefore, Accounts Inventory is debited with $160,000.

Land is an asset and it is increased by $30,000. Therefore, Land is debited with $30,000.

Building and equipment is an asset and it is increased by $350,000. Therefore, Building and equipment is debited with $350,000.

Bond discount is an asset and it is increased by $5,000. Therefore, Bond discount is debited with $5,000.

Goodwill is an asset and it is increased by $125,000. Therefore, Goodwill is debited with $125,000.

Accounts Payable is a liability and it is increased by $10,000. Therefore, Accounts Payable account is credited with $10,000.

Bonds Payable is a liability and it is increased by $150,000. Therefore, Bonds Payable account is credited with $150,000.

Common Stock is equity and it is increased by $80,000. Therefore, Common Stock account is credited with $80,000.

Additional paid in capital is equity and it is increased by $520,000. Therefore, Additional paid in capital account is credited with $520,000.

Deferred stock issue cost is equity and it is increased by $9,000. Therefore, Deferred stock issue cost account is credited with $9,000.

Working Note:

Calculation of goodwill:

Particulars	Amount
Fair value of consideration given (4,000×$150)	$600,000
Fair value of net assets acquired ($630,000−$10,000−$145,000)	($475,000)
Goodwill	$125,000

Table (2)

Answer 7

Chapter 1, Problem 1.35P

a.

To determine

To prepare: Journal entries that Company R would record for acquisition.

Introduction: Internal expansion refers to situation in a company forms a subsidiary by transferring some of its assets and liabilities and in exchange of ownership shares. Shares of the subsidiary is either provided to the shareholders in addition to their existing shares (Spin off) or in exchange of their existing shares (split off).

Answer 8

a.

Expert Solution

Explanation of Solution

In the books of Company P:

Record transfer of assets and liabilities:

Date	Account	Debit ($)	Credit($)
	Cash	30,000
	Accounts Receivable	60,000
	Inventory	160,000
	Land	30,000
	Building and Equipment	350,000
	Bond Discount	5,000
	Goodwill	125,000₁
	Accounts payable		10,000
	Bonds payable		150,000
	Common Stock		80,000
	Additional Paid-in Capital		520,000
	(To record transfer of assets and liabilities)

Table (1)

Cash is an asset and it is increased by $30,000. Therefore, cash account is debited with $30,000.

Accounts Receivable is an asset and it is increased by $60,000. Therefore, Accounts Receivable account is debited with $60,000.

Inventory is an asset and it is increased by $160,000. Therefore, Accounts Inventory is debited with $160,000.

Land is an asset and it is increased by $30,000. Therefore, Land is debited with $30,000.

Building and equipment is an asset and it is increased by $350,000. Therefore, Building and equipment is debited with $350,000.

Bond discount is an asset and it is increased by $5,000. Therefore, Bond discount is debited with $5,000.

Goodwill is an asset and it is increased by $125,000. Therefore, Goodwill is debited with $125,000.

Accounts Payable is a liability and it is increased by $10,000. Therefore, Accounts Payable account is credited with $10,000.

Bonds Payable is a liability and it is increased by $150,000. Therefore, Bonds Payable account is credited with $150,000.

Common Stock is equity and it is increased by $80,000. Therefore, Common Stock account is credited with $80,000.

Additional paid in capital is equity and it is increased by $520,000. Therefore, Additional paid in capital account is credited with $520,000.

Deferred stock issue cost is equity and it is increased by $9,000. Therefore, Deferred stock issue cost account is credited with $9,000.

Working Note:

Calculation of goodwill:

Particulars	Amount
Fair value of consideration given (4,000×$150)	$600,000
Fair value of net assets acquired ($630,000−$10,000−$145,000)	($475,000)
Goodwill	$125,000

Table (2)

Answer 9

a.

Expert Solution

Answer 10

a.

Expert Solution

Answer 11

Expert Solution

Answer 12

b.

To determine

To prepare: Balance sheet immediately following the acquisition.

Introduction: Internal expansion refers to situation in a company forms a subsidiary by transferring some of its assets and liabilities and in exchange of ownership shares. Shares of the subsidiary is either provided to the shareholders in addition to their existing shares (Spin off) or in exchange of their existing shares (split off).

b.

Expert Solution

Explanation of Solution

The balance sheet immediately following the acquisition:

	Company RCombined Balance SheetJanuary 1, 20X2
Assets		Amount($)	Liabilities	Amount($)	Amount($)
Current Assets			Current Liabilities
Cash		100,000	Accounts payable		60,000
Accounts receivables		160,000	Bonds payable	450,000
Inventory		360,000	Less: Discount	(5,000)	445,000
Fixed Assets
Land		80,000	Common Stock
Building and equipment	950,000		Common Stock		280,000
Less: Accumulated depreciation	(250,000)	700,000	Additional Paid-in capital		560,000
Goodwill		125,000	Retained Earnings		180,000

		1,525,000			1,525,000

Table (3)

Answer 13

b.

To determine

To prepare: Balance sheet immediately following the acquisition.

Introduction: Internal expansion refers to situation in a company forms a subsidiary by transferring some of its assets and liabilities and in exchange of ownership shares. Shares of the subsidiary is either provided to the shareholders in addition to their existing shares (Spin off) or in exchange of their existing shares (split off).

Answer 14

b.

Expert Solution

Explanation of Solution

The balance sheet immediately following the acquisition:

	Company RCombined Balance SheetJanuary 1, 20X2
Assets		Amount($)	Liabilities	Amount($)	Amount($)
Current Assets			Current Liabilities
Cash		100,000	Accounts payable		60,000
Accounts receivables		160,000	Bonds payable	450,000
Inventory		360,000	Less: Discount	(5,000)	445,000
Fixed Assets
Land		80,000	Common Stock
Building and equipment	950,000		Common Stock		280,000
Less: Accumulated depreciation	(250,000)	700,000	Additional Paid-in capital		560,000
Goodwill		125,000	Retained Earnings		180,000

		1,525,000			1,525,000