On January 2, 2018, AAA Corporation acquired 75% of BBB Company's outstanding common stock. In exchange...

  

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On January 2, 2018, AAA Corporation acquired 75% of BBB Company's outstanding common stock. In exchange for BBB's stock, AAA issued bonds payable with a par value of $500,000 and fair value of $510,000 directly to the selling stockholders of BBB. At that date, the fair value of the non-controlling interest was $170,000. The two companies continued to operate as separate entities subsequent to the combination. Immediately prior to the combination, the book values and fair values of the companies' assets and liabilities were as follows: AAA Corporation Book Value Fair Value BBB Company Book Value Fair Value $ 9,000 $9,000 Cash $ 12,000 $ 12,000 Receivables 41,000 39,000 31,000 30,000 Allowance for Bad Debts (2,000) (1,000) Inventory 86,000 89,000 68,000 72,000 Land 50,000 70,000 Buildings & Equipment Accumulated Depreciation 55,000 200,000 960,000 650,000 (411,000) 670,000 500,000 (220,000) Patent 40,000 Total Assets Current Payables Bonds Payable Common Stock $741,000 $990,000 $ 38,000 $ 38,000 200,000 210,000 $607,000 $721,000 $ 29,000 $ 29,000 100,000 100,000 200,000 300,000 Additional Paid-In Capital 100,000 130,000 Retained Earnings 103,000 148,000 Total Liabilities & Equity $741,000 $607,000 At the date of combination, BBB owed AAA $6,000 plus accrued interest of $500 on a short-term note. Both companies have properly recorded these amounts. Required 1. Record the business combination on the books of AAA Corporation. 2. Present in general journal form all consolidation entries needed in a worksheet to prepare a consolidated balance sheet immediately following the business combination on January 2, 2018. 3. Present a consolidated balance sheet for AAA and for BBB as of January 2, 2018. On January 2, 2018, AAA Corporation acquired 75% of BBB Company's outstanding common stock. In exchange for BBB's stock, AAA issued bonds payable with a par value of $500,000 and fair value of $510,000 directly to the selling stockholders of BBB. At that date, the fair value of the non-controlling interest was $170,000. The two companies continued to operate as separate entities subsequent to the combination. Immediately prior to the combination, the book values and fair values of the companies' assets and liabilities were as follows: AAA Corporation Book Value Fair Value BBB Company Book Value Fair Value $ 9,000 $9,000 Cash $ 12,000 $ 12,000 Receivables 41,000 39,000 31,000 30,000 Allowance for Bad Debts (2,000) (1,000) Inventory 86,000 89,000 68,000 72,000 Land 50,000 70,000 Buildings & Equipment Accumulated Depreciation 55,000 200,000 960,000 650,000 (411,000) 670,000 500,000 (220,000) Patent 40,000 Total Assets Current Payables Bonds Payable Common Stock $741,000 $990,000 $ 38,000 $ 38,000 200,000 210,000 $607,000 $721,000 $ 29,000 $ 29,000 100,000 100,000 200,000 300,000 Additional Paid-In Capital 100,000 130,000 Retained Earnings 103,000 148,000 Total Liabilities & Equity $741,000 $607,000 At the date of combination, BBB owed AAA $6,000 plus accrued interest of $500 on a short-term note. Both companies have properly recorded these amounts. Required 1. Record the business combination on the books of AAA Corporation. 2. Present in general journal form all consolidation entries needed in a worksheet to prepare a consolidated balance sheet immediately following the business combination on January 2, 2018. 3. Present a consolidated balance sheet for AAA and for BBB as of January 2, 2018.

Answer rating: 100% (QA)

Solution Explanation Journal entries on the books of AAA Corporatio I... View the full answer