The account balances for Staten Incorporated and Tacom Corporation on December 31, 2011 are given below:
|States Incorporated Book Values at 12/31/2011||Tacom Corporation Book Values at 12/31/2011||Tacom Corporation Fair Values at 12/31/2011|
|Additional paid in capital||300,000||200,000|
|Retained earnings 1/1/11||300,000||150,000|
Staten purchased all the outstanding shares of Tacom on December 31, 2011 by issuing 60.000 shares at their $10 par value. Staten paid $10,000 in fees and $5,000 in share issuance costs. These transactions are not included in the account information provided.
Prepare the necessary journal entries in Staten's books if Tacom is dissolved and Staten's per share fair value is $15.
When an entity purchases all the common stock outstanding of the subsidiary,the acquiring company records the assets and liabilities of the acquired company at fair value.
Answer and Explanation:
|Additional Paid in Capital||300,000|
|Business Combination Expenses||10,000|
|Additional Paid in Capital||5,000|
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from CFP Certification Exam Study Guide - Certified Financial PlannerChapter 8 / Lesson 1