A parent acquires all of the stock of a subsidiary for $40 million in cash. The subsidiarys
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Question:
A parent acquires all of the stock of a subsidiary for $40 million in cash. The subsidiary’s books report the following account balances at the date of acquisition (in trial balance format). Date-of-acquisition fair values are also displayed.
(in millions) | Book value Dr (Cr) | Fair value Dr (Cr) |
---|---|---|
Current assets | $ 5 | $ 6 |
Noncurrent assets | 45 | 38 |
Liabilities | (40) | (42) |
Capital stock | (8) | |
Retained earnings | (3) | |
Accumulated other comprehensive loss | 1 | |
Total | $ 0 |
On the consolidation working paper, eliminating entry (E) debits
a. liabilities by $2 million.
b. accumulated other comprehensive loss by $1 million.
c. investment in subsidiary by $10 million.
d. retained earnings by $3 million.
Related Book For
Advanced Accounting
ISBN: 978-1934319307
2nd edition
Authors: Susan S. Hamlen, Ronald J. Huefner, James A. Largay III
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