1. A parent company exchanges 36,000 shares of its $2 par value common stock, with a fair...
Question:
1. A parent company exchanges 36,000 shares of its $2 par value common stock, with a fair value of $18/per share, for all of the shares owned by the subsidiary’s shareholders. On the acquisition date, the subsidiary reported $180,000 of contributed capital (i.e., common stock) and $270,000 of retained earnings. An examination of the subsidiary’s balance sheet revealed that book values were equal to fair values for all assets except for an unrecorded patent which has a fair value of $198,000. In preparing the consolidated balance sheet on the acquisition date, which of the following is correct regarding the [E] consolidating entry?
A.The [E] entry includes a credit to common stock $180,000
B.The [E] entry includes a credit to Equity Investment $648,000
C.The [E] entry includes a debit to Equity Investment $198,000
D.The [E] entry includes a credit to Equity Investment $450,000
Expert Answer:
The correct answer is D The E entry includes a credit to Equity Investment 450000 When a parent comp... View the full answer
