ACT506

Critical Thinking Assignment Module 4 Option #2

Consolidation at Acquisition Date of Foreign Subsidiary into the U.S. Parent, Push Corporation on Jan 02, 20x7

Information:

1)

Push Corporation purchased Summer British Corp on Jan 02, 20x7, for 100% control.

2)

The local currency for Summer Britain Corp is the British Pound. This is the functional currency.

3)

The British Subsidiary had revenue of $10,000. Push Corp received $10,000 Dollars with a U.S. Company when the exchange rate was $1.20 = (GBP) 1.00.

4)

Relevant Spot exchange rates ($/ GBP)

(One GBP equals the values at the time)

Date

Rate

1/2/20x7

1.3

20x7 Average

1.35

20x7 Aver

1.35

Assume that Parent (PUSH Corporation) decides to acquire 100% Subsidiary (Summer British) for $400,000. Prepare the appropriate journal entries.
Push Company Balance Sheet			Prepare the journal entries for acquiring 100% of the net assets of S (Southern TXO), accounting for it as a merger.				Prepare Elimination Entries for Stock Acquisition													Basic Eliminating Entry 01/02/20x7			Debit	Credit
Assets, Liabilities & Equities	Book Value						Account	DR	CR
Cash	$1,800,000		Account	DR	CR															Common Stock
AR	$20,000																			Paid In Capital
Inventory	$100,000																			Retained Earnings
Land	$30,000																			Good will
PP&E	$300,000																				Investment
Accumulated Depreciation	-$150,000
Patent	$0
Total Assets	$2,100,000
AP	$100,000
Common Stock ($10 par)	$500,000															1/2/20x7
Additional Paid In Capital	$700,000		Which accounting method is most appropriate for representing an investment of this type?				Balance Sheet (Consolidated)				Summer British Corp		Subsidiary US ($)	Parent		Stock Acquisition		Parent	Subsidiary	Eliminating entries		Total Consolidated Statement on 01/02/20x7
Retained Earnings	$800,000						Assets, Liabilities & Equities		Book Value		(GBP)	01/02 spot rate				DEBIT	Credit			Debit	Credit
Total Liabilities & Equity	$2,100,000									CASH	15,385			1,800,000					20,000
Subsidiary (Summer British ) Balance Sheet										AR	7,693			20,000					10,000
Assets, Liabilities & Equities	(GBP) Book Value									INV	30,770			100,000					40,000
Cash	$15,385									Land	30,770			30,000					40,000
AR	$7,693									PPE	230,769			300,000					300,000
Inventory	$30,770									ACC Depr	153,847			-150,000					-200,000
Land	$30,770									Goodwill	0			0					0
PP&E	$230,769		Prepare the journal entries for a 100% of S (Summer British), accounting for it using the equity method						$0	Investment	161,540			2,100,000					0
Accumulated Depreciation	-$153,847									Total				0					210,000
Patent	$0		Account	DR	CR					AP	38,462			100,000					50,000
Total Assets	$161,540									CS	38,462			500,000					50,000
AP	$38,462									PIC	38,462			700,000					50,000
Common Stock	$38,462		Prepare the journal entries for a 100% Acquisition by issuing 10,000 shares of Big Company Stock							RE	46,154			800,000					60,000
Additional Paid In Capital	$38,462									Total	161,540			2,100,000					210,000
Retained Earnings	46, 154		Account	DR	CR
Total Liabilities & Equity	$161,540
Assume that Book Value = Fair Value