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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Consolidated Balance Sheet

Augusta Inc. acquired 100% of the outstanding common stock of Dear Corporation in a busi ness combination. Immediately before the business combination, the two businesses had the fol lowing balance sheets:

Chapter A2, Problem 28E, Consolidated Balance Sheet Augusta Inc. acquired 100% of the outstanding common stock of Dear

Augusta agreed to give Dear’s stockholders SI,500 cash in exchange for all their Dear common stock. Dear’s equipment has a fair value of $1,100.

Required:

1. Prepare the entries for Augusta and Dear to record the business combination.

2. Prepare the balance sheet of Augusta immediately after the business combination.

3. Prepare the balance sheet of Dear immediately after the business combination.

4. Calculate the amount of the adjustment to the book value of Dear’s equity and the amount of goodwill.

5. Prepare a consolidated balance sheet immediately after the combination.

To determine

(a)

Introduction:

When a company holds 50% or more of the common stock of another company then both the companies are treated as a single entity. In such a case, consolidated statements are prepared.

To prepare:

Journal entry for business combination.

Explanation
Particulars Debit ($) Credit ($)...
To determine

(b)

Introduction:

When a company holds 50% or more of the common stock of another company then both the companies are treated as a single entity. In such a case, consolidated statements are prepared.

To prepare:

Balance Sheet of A Inc. (post acquisition).

To determine

(c)

Introduction:

When a company holds 50% or more of the common stock of another company then both the companies are treated as a single entity. In such a case, consolidated statements are prepared.

To prepare:

Balance Sheet of D Corporation. (post acquisition).

To determine

(d)

Introduction:

When a company holds 50% or more of the common stock of another company then both the companies are treated as a single entity. In such a case, consolidated statements are prepared.

To calculate:

The goodwill and amount adjusted in the book value.

To determine

(e)

Introduction:

When a company holds 50% or more of the common stock of another company then both the companies are treated as a single entity. In such a case, consolidated statements are prepared.

To prepare:

Consolidated Balance Sheet.

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