Is this done correctly? Assume an investor purchases the business of an investee for $26,880. The fair
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Is this done correctly?
Assume an investor purchases the business of an investee for $26,880. The fair values of the individual net assets are equal to their reported book values. The investee company reports the following balance sheet on the acquisition date:
Current assets | $23,520 | Current liabilities | $16,800 | |
Property, plant and equipment, net | 33,600 | Long-term liabilities | 13,440 | |
- | Stockholders' equity | 26,880 | ||
Total assets | $57,120 | Total liabilities & equity | $57,120 |
Parts a. and b. are independent of each other.
a. Provide the journal entry if the investor pays cash and purchases the assets and assumes the liabilities of the investee company.
Debit | Credit | ||
---|---|---|---|
Current Assets | 23520 | ||
PPE, net | 33600 | ||
Current Liabilities | 16800 | ||
Long-term Liabilities | 13440 | ||
Cash | 26880 | ||
(to record the acquisition) |
b. Provide the journal entry if the investor pays cash and purchases all of the stock of the investee's shareholders.
Debit | Credit | ||
---|---|---|---|
Equity Investment | 26880 | ||
Cash | 26880 | ||
(to record the acquisition) |
Related Book For
Introduction to Management Accounting
ISBN: 978-0133058789
16th edition
Authors: Charles Horngren, Gary Sundem, Jeff Schatzberg, Dave Burgsta
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