Question

Apex Corporation acquired 75 percent of Beta Company’s common stock on May 15, 20X3, at underlying book value. Beta’s balance sheet on December 31, 20X6, contained these amounts:


During 20X7, Apex earned operating income of $90,000, and Beta reported net income of $45,000. Neither company declared any dividends during 20X7. Assume Apex Corporation has only no-par stock outstanding. Beta is considering repurchasing 1,000 of its outstanding shares as treasury stock for $68 each.

Required
a. Assuming Beta purchases the shares from Nonaffiliated Company on January 1, 20X7:
(1) Compute the effect on the book value of the shares held by Apex.
(2) Give the entry on Apex’s books to record the change in the book value of its investment in Beta’s shares.
(3) Prepare the elimination entries needed on December 31, 20X7, to complete a consolidation worksheet.
b. Assuming Beta purchases the shares directly from Apex on January 1, 20X7:
(1) Compute the effect on the book value of the shares held by Apex.
(2) Give the entry on Apex’s books to record its sale of Beta shares to Beta.
(3) Prepare the elimination entries needed on December 31, 20X7, to complete a consolidationworksheet.


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  • CreatedMay 23, 2014
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