80.2K

Verified Solution

Link Copied!

1. Assume X Corp creates a subsidiary, Y Corp, and invests $500,000 cash in exchange for all of the $1 par common stock (2,000 shares). (2.5 marks) What would journal entries X and Y make at the time of the investment? Answer:

2. X Corporation created Y Corporation with a transfer of $1,000 cash. During Y Corp.s first year of operations, it generated a net loss of $50 and paid no dividends. During Y Corp.s second year of operations, it generated net income of $100 and paid cash dividends of $30. (2.5 marks) Required: A. Pass journal entries in the books of X corp. in year 1 and year 2 using equity method. B. What is the balance of investment account at the end of year 2 using equity method? C. Pass journal entries in the books of X corp. in year 1 and year 2 using cost Method. D. What is the balance of investment account at the end of year 2 using cost method? Answer:

3. X Corp. Acquired 100% of common stock of Y Corp. Paying $ 2 Million in return for 50 Thousand common stock with $ 1 par value. Y Corp. realized $100 Thousand net income and paid $30 Thousand cash dividends. (2.5 marks) Required: pass basic elimination entries in consolidation work sheet. Answer:

4. X Corp. Acquired 100% of common stock of Y Corp. X Corp. assumed acquisition expenses as follows (amounts in $)(2.5 marks)

Legal fees 50,000 Accounting fees 30,000 Travel expenses 10,000 Legal fees (stock issue) 20,000 Accounting fees (stock) 15,000 SEC filing fees (stock) 10,000 Prior to the acquisition date, $90,000 have been paid and capitalized to a deferred charges account on the balance sheet. The remaining $45,000 has not been paid or accrued. Required: Prepare the journal entry to record the acquisition expenses. Answer:

Answer & Explanation Solved by verified expert

See Answer