Supernova Company had the following summarized balance sheet on December 31, 20?1:

The fair value of the inventory and property and plant is $600,000 and $850,000, respectively.

Assume that Redstar Corporation exchanges 45,000 of its $3 par value shares of common stock, when the fair price is $4/share, for 1008 of the common stock of Supernova Company. Redstar incurred indirect acquisition costs of $10,000.(100% purchase with Extraordinary Gain)

Required:

a. What journal entry will Redstar Corporation record for the investment in Supernova?

b. Prepare a supporting determination and distribution of excess schedule

c. Prepare Redstar's elimination and adjustment entry for the acquisition of Supernova.

Transcribed Image Text:

Accounts receivable.. Inventory..... Property and plant (net) Goodwill.. Total... Assets Liabilities and Equity Notes payable.. Common stock, $5 par. Paid-in capital in excess of par. Retained earnings... Total.... 200,000 450,000 600,000 150,000 $1,400,000 $ == 600,000 300,000 400,000 100,000 $1,400,000 $ Accounts receivable.. Inventory..... Property and plant (net) Goodwill.. Total... Assets Liabilities and Equity Notes payable.. Common stock, $5 par. Paid-in capital in excess of par. Retained earnings... Total.... 200,000 450,000 600,000 150,000 $1,400,000 $ == 600,000 300,000 400,000 100,000 $1,400,000 $

Answer rating: 100% (QA)

a Investment journal entry Date Account name Debit Credit Investment in Supernova 75000 20 1500000 C... View the full answer