Axel Corporation acquires 100% of the stock of Wheal Company on December 31, Year 4. The following

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Axel Corporation acquires 100% of the stock of Wheal Company on December 31, Year 4. The following information pertains to Wheal Company on the date of acquisition:


Axel Corporation acquires 100% of the stock of Wheal Company


Axel Corporation issues $110,000 par value ($350,000 market value on December 31, Year 4) of its own stock to the shareholders of Wheal Company to consummate the transaction, and Wheal Company becomes a wholly owned, consolidated subsidiary of Axel Corporation.
a.
Prepare journal entries for Axel Corp. to record the acquisition of Wheal Company stock assuming (1) pooling accounting and (2) purchase accounting.
b. Prepare the worksheet entries for Axel Corp. to eliminate the investment in Wheal Company stock in preparation for a consolidated balance sheet at December 31, Year 4 assuming (1) pooling accounting and (2) purchase accounting.
c. Calculate consolidated retained earnings at December 31, Year 4 (Axel's retained earnings at this date are $150,000), assuming:
(1) Axel Corp. uses the pooling method for this business combination.
(2) Axel Corp. uses the purchase method for acquisition of WhealCompany.

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...
Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
Par Value
Par value is the face value of a bond. Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. The market price of a bond may be above or below par,...
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Financial Statement Analysis

ISBN: 978-0078110962

11th edition

Authors: K. R. Subramanyam, John Wild

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