Assume that Big Company decides to acquire 100% Little Company for $500,000. Prepare the appropriate journal entries.

Big Company Balance Sheet
Assets, Liabilities & Equities	Book Value
Cash	$2,100,000
AR	$10,000
Inventory	$200,000
Land	$40,000
PP&E	$400,000
Accumulated Depreciation	-$150,000
Patent	$0
Total Assets	$2,600,000
AP	$100,000
Common Stock ($10 par)	$450,000
Additional Paid In Capital	$600,000
Retained Earnings	$1,450,000
Total Liabilities & Equity	$2,600,000
Little Company Balance Sheet
Assets, Liabilities & Equities	Book Value
Cash	$35,000
AR	$10,000
Inventory	$65,000
Land	$40,000
PP&E	$400,000
Accumulated Depreciation	-$150,000
Patent	$0
Total Assets	$400,000
AP	$100,000
Common Stock	$100,000
Additional Paid In Capital	$50,000
Retained Earnings	$150,000
Total Liabilities & Equity	$400,000

Requirements:

1. Prepare the journal entries for acquiring 100% of the net assets of little, accounting for it as a merger.

2. Which accounting method is most appropriate for representing an investment of this type?

3. Prepare the journal entries for a 100% of Little Company, accounting for it using the equity method

4. Prepare the journal entries for a 100% Acquisition by issuing 10,000 shares of Big Company Stock

5. Prepare Elimination Entries for Stock Acquisition

Answer rating: 100% (QA)

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